Sunday, February 27, 2011

States and Federal Money

The states have placed themselves in a precarious position by taking Federal money for purposes not intended by the Constitution.

The budget cuts pushed through by states have been a drag on the economy as governors make up for revenue lost during the past two years. State and local government spending dropped at an annual rate of 2.4 percent during the last three months of 2010, the Commerce Department reported yesterday, marking the sixth quarterly drop since the last three months of 2008.

By using Federal money to prop up state budgets and provide make-work jobs (that is what they are), states have also suffocated the private sector.  That is, root cause of the the drag on the economy is not that states stopped spending, but rather that they spent on the wrong things at the wrong time in the first place.

This is just a lie:

The U.S. deficit will widen this year to $1.6 trillion, Democratic President Barack Obama said in his fiscal 2012 sent to Congress on Feb. 14, partly because of the $858 billion tax cut approved in December.
There was no "tax cut" approved in December, but rather an extension of tax rates already in place.
It is unlikely states with Democrat governors will learn to live within their means.  Buying constituencies with government largess is their stock and trade (Republicans do it to, but I hope they have learned the lesson.  The Federal government must quit bailing out the states and states must stand up and live within their means

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