Economic Growth

Great Moments in Federalism and Fiscal Responsibility


Blame it on Washington

How would you finish this sentence?

While the draconian [budget] changes under consideration in many states are a sad legacy of the economic downturn, their sheer magnitude represents a failure of…

"State governance"? "Fiscal stewardship"? "Basic competence of our bipartisan governing class"? Nope! Here's how The New Republic's Alexander C. Hart finishes the sentence:

…the federal government: From Hill Republicans to President Obama, officials in Washington are proposing new budgets that wouldn't do nearly enough to assist the states.

Why, if we cut any more, we might get to the fat!

We told you in April 2009, and we'll keep telling you until it trickles down to the thick skulls of policy journalists and pols alike: States jacked up spending by 81 percent (adjusted for inflation) between just 2002 and 2007, when the economy was going just fine. In order to make the case for poverty (let alone the case that it's the federal government's responsibility to bail out the bad decisions by state governments), you have to ignore that pre-recession spending binge. Sure enough:

States are facing these gaps largely because tax revenues are well below historical norms—Texas, for example, is projected to collect $72 billion in fiscal 2012 and 2013, down from $87 billion in the two years that preceded it—and the bad economy requires governments to support more people with unemployment and Medicaid benefits.

That's one way of looking at it. Here's another

What comes up….

In 2002 states collected $535 billion in taxes; by 2007 that had grown to $749 billion, an increase of 40 percent, or more than twice the rate of inflation and population growth.

The robust growth in state tax revenue during this five-year period is only part of the story. The pace of this growth is notable: rising slowly out of the recession, increasing rapidly, and then beginning to taper off in advance of the general economic slowdown. In 2002–03, the rate was 2.4 percent. By 2004–05, it had leaped to 10 percent. In 2006–07 it was down to 5.4 percent—a more moderate level, but still far ahead of inflation.

The decline in the rate of tax revenue growth ought to have sent a signal to state budget drafters. Instead, they seem to have looked beyond the data and assumed continuing strong revenue growth. State budgets for fiscal year 2008, which were drafted toward the end of the period analyzed here, called for more than an 8 percent annual spending increase on average. Small wonder states had to make mid-year adjustments to their budgets in the middle of 2008 as the economy began to cool.

Instead of socking away money during the good times, state governments ladled out the windfall to public employees, and made pension promises no honest bureaucracy could keep. President Obama and the Democratic Congress bailed them out twice with buckets of cash, but the new House Republican leadership doesn't seem so keen.

And for good reason. There are too many people in or near power who honestly believe stuff like this:

These cuts not only impose a human cost; they also threaten to undermine our fragile economic recovery. While it's tempting to cheer government belt-tightening—if families have to make sacrifices, why shouldn't state governments?—they're ultimately harmful in the same way as private-sector reductions. Unemployed government employees, just like unemployed factory workers and CEOs, will spend less money in malls, on groceries, and at the movies.

Not to belabor what should be the obvious, but there is a key difference between a laid-off machinist and a laid-off bureaucrat, and it's not just the lavish pensions of the latter. Public employees are compensated (and handsomely) with our money, factory workers (well, most of them) are not. If you reduced the amount of tax money dedicated to compensating public employees, especially those whose work is not adding to the general welfare, you could theoretically increase the amount of their own money individuals were allowed to keep, which would have a stimulating effect on the economy. Government spending was sharply reduced in the United States after World War II, in New Zealand in the 1980s, and in Canada during the '90s, and in each case the result was not economic armageddon, but strong economic growth.

Using government as a means to prop up employment is an experiment whose failure is not obscure. And using still more tax money to bail out the reckless waste of other tax dollars is a recipe not for growth, nor fiscal responsibility, but eventual collapse.

I wrote about the state bankruptcy idea last month.

NEXT: Reason Writers Around Town: Peter Suderman in The Wall Street Journal on ObamaCare and the Medicaid Mess

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  1. We’re surprised by a pro-statism piece in The New Republic?

    1. Fucking Christ-fag.

  2. Great Moments in Federalism and Fiscal Responsibility

    I was expecting to open this and see nothing except your signature, Matt!

    This “fiscal responsibility” of which you speak – has it ever been captured on film, or do we still only have the reports of the wild-eyed crazies who claim to have caught glimpses of it in the wild?

    1. “the falling tax revenues….ohhhh nooooes!!!!!1” FUCK these articles raise my blood pressure.


      1. Typical violent Christ-faggotry.

  3. In the name of Allah, the Most Gracious, the Most Merciful

    Instead of sitting around on the internet all day, posting pointless messages about “freedom” and abusing yourselves to pictures of loose women, why not do something productive and surrender your lives to Allah?

    Western society has become decadent, weak, and lazy, and is soon to collapse. The upcoming generation, people such as yourselves, want nothing more from life than to grow fat sitting around on computers all day, masturbating, drinking, and taking drugs. You are encouraged in this behavior by corrupt politicians and absent new age parents while your societies and economies collapse around you. Meanwhile the Muslim Ummah, or brotherhood, grows rich on oil wealth and trains its upcoming generation to serve Allah, and to fight, willing to give their lives if necessary for the cause. The 19 hijackers of 9/11 have surely earned their place in paradise as do the suicide bombers who strike daily into the heart of the devil state of Israel. We are living among you, in Europe and America, and we are outbreeding you day by day, slowly taking over.

    Allah has a plan for each of us. He means us all to be good Muslims and live by his rules, as set out to the Prophet Muhammed (pbuh). Your sinful lives and wicked ways go against His plans, and you will be tortured for eternity in hell for your iniquities. Repent now and revert back to the one true faith.

    Where your joke of a faith, which no one in your society believes in anyway, tells you to love, be tolerant, and turn the other cheek, the Quran teaches us to “Kill the unbelievers wherever you find them, capture and besiege them and prepare for them every kind of ambush.”

    It also says “Against them make ready your strength to the utmost of your power, including steeds of war, to strike terror into (the hearts of) the enemies, of Allah and your enemies”.

    How can you hope to win your futile so called ‘war on terror’ against us? You have become weak, and no longer willing or able to fight. You even elected a pacifist president with Muslim sympathies to try and placate us. It’s only a matter of time until we win. Even now your soldiers contine to die on the battlefields of Afghanistan, and for what? The moment you leave, it will be back to traditional Sharia law. Your technological advances count for nothing if all you do with them is watch porn and play video games. We will continue our jihad on the west, to maim and kill those who oppose or insult us. See the truth for what it is and revert to Islam immediately. It is your only hope of survival.

    Abu Akil Walid ibn Tarekh al-Hindi

    1. You practice your beliefs, and we’ll decide what we want to believe. Without your “help”.

    2. There’s only one problem here, Walid: There’s no such being as Allah. Otherwise, you’re spot on.

    3. Wow, what a great message from a sincere supporter of radical Islam! Because, as we all know, they spend most of their time on the internet posting screeds on libertarian blogs. I mean what else could it be? Could it be some neo-con KULTUR WAR retard spoofing an Islamist in order to “prove” that teh Muslims are scary? NAAAAAAAAAAAAAAH.

      1. Holy fucking squirrel attack, Batman!

      2. Jesus tap dancing christ, what the hell are you all going on about?

        1. A troll posted a screed, pretending to be a supporter of radical Islam. At Warty’s behest, the squirrels removed said screed but not our replies, resulting in hilarity and confusion.

  4. Another illustration of why simply raising taxes in the current climate is a bad idea. Almost certainly, any increase in tax revenue will be used to fund new spending, not pay off debt.

      1. You’ll understand when you’re older.

        1. Clarification:
          He’ll understand when he has to spend his own money responsibly. Then, he will notice how much the Guvment takes. And keeps taking.

      2. Re: Tony,


        It’s when you obtain one of those credit cards where you can transfer the balances from other cards, and when you do, you thenuse the other cards to perform more purchases, ballooning your debt even more.

        Same shit.

      3. Wow! My first time being Tony-ed.

  5. This shit works, goddamnit. It doesn’t matter how many tenured (and enNobeled) professors it takes, we will repackage Keynes until we hear the lamentation of your women.

  6. Here’s how The New Republic’s Alexander C. Hart finishes the sentence[…]

    Oh come on! It’s The New Republic, for cryin’ out loud! What did you expect?

    1. I expected them to at least make some sort of variation on the “I’ll be Bach joke”.

  7. Damn money tree stopped bearing fruit!

    1. As Margaret Thatcher once observed, that’s the problem with socialism, sooner or later you run out of other people’s money to tax and spend.

      But not to worry, the politicians will no doubt pretend everything’s okay and there’s no problem in keeping on raising taxes to continue spending. Sooner or later inflation will resolve the issue, rather than allowing good deflation, as opposed to bad deflation, help solve the problem… see

  8. Ten years ago i’da told you The New Republic best represented my world view. Now I feel the way someone who once belonged to a cult must feel.

  9. Matty,

    Seems some Rush wannabe name of McCullough, Kevin just about ripped you and the fellow Koch Disciples a collective F—-n (homage to your penchant for F bombs) new one on Valentine’s Day – and did so on King Roger’s website no less.…..l-mission/

    Disrespectful Libertarians Hijack CPAC Poll – And Its Mission
    By Kevin McCullough
    Fox News – Fair & Balanced
    Published February 14, 2011

    Wrote this kid, McCullough:

    “It is the libertarian in attendance that produced the free pornographic calendar passed out to attendees in 2010. It is the libertarians in attendance who openly promote the inclusion of groups like GOProud, largely as an attempt to silence groups who would speak in strong support of traditional moral values. It is the libertarian in attendance who slandered President George Bush, by claiming his appreciation for the Constitution was best summed up as a ‘damn piece of paper.’ It is the libertarian in attendance that proclaimed the war to prevent terrorists from regathering strength and coming after our homeland as ‘illegal.’ And it is the libertarian in attendance that eschewed, booed, cajoled and screamed ‘war criminal’ to Vice President Dick Cheney, a man who served his country with commitment and still attempts to help the world understand the threat of the radical Islamic element devising plans to eliminate us and our allies.

    “Now the libertarians stuffed the ballot box of the CPAC straw poll, and for the second year in a row made it the laughingstock poll in the eyes of the voters. (This year’s voters are perhaps more engaged, more aware and more plugged in than ever before.)”

    Matty, were your Kochian Paymasters (offshore, of course) F—-n aware that this F—-n McCullough was going to F—-n light all of you up and do so on F—-n King Roger’s F—-n website?

  10. It is the libertarians in attendance who openly promote the inclusion of groups like GOProud, largely as an attempt to silence groups who would speak in strong support of traditional moral values.

  11. Its such a great post. Thanks for the sharing.

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