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States & Governors want Federal Bailout   February 2nd, 2009
Not surprisingly, even Republican governors want free money       


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It's unfortunate, but not surprising, that even Republican governors are seeking a federal bailout to address deficits in state budgets.


President Obama said Monday that Republican and Democratic governors across the country want "swift action" on an economic stimulus plan, urging Washington lawmakers not to let "modest differences" stall the package.

Obama spoke to reporters at the top of a meeting with Vermont Gov. Jim Douglas, a Republican who supports the stimulus proposal. As the president faces a possible Senate revolt over his recovery package, he is turning to the states for last-minute help in swaying skeptical lawmakers.

"Nobody understands (the need for action) better than governors, mayors, county officials, who are seeing the devastating effects on the ground of the contractions of this economy," Obama said, with the Senate set to debate the legislation in a matter of hours...

"It's not unanimous support among Republican governors, but certainly there's a great deal of them who are working to help support this recovery package," Casey told FOXNews.com.

It's unfortunate that Republican governors are sacrificing their principles for expediency. I suppose it's not surprising, though. If I were facing personal bankruptcy and someone was offering me free money, I'd have a tough time convincing myself I should turn it down. And why make hard choices in my personal finances if someone else could bail me out?

However, what would be easy to turn down is if someone else was suggesting borrowing money they couldn't afford to borrow in order to give it to me to solve my problems. That's what governors are doing when they look to the federal government to bailout their states.

Socializing the deficit of a state so it becomes a liability of the federal government is not acceptable. Why should everyone in the country be liable for the poor financial management of any given state? Most states have the good sense to have constitutional requirements for a balanced budget; but that provision is meaningless if the balance is only obtained by transferring the state deficit to the federal government that doesn't have a balanced budget requirement.

If the federal government is to provide a bailout to the states, the "bailout" should be in the form of loans to the states. States should be required to pay the money back to the federal government, plus interest, and should be required to adhere to significant austerity measures--much like when countries request a loan from the IMF or World Bank.

I don't like the idea of the federal government becoming a source of financing to the states. But if we're going to go down that road then we need to at least make sure that the states pay back the money plus interest, and that they make changes to the management of their finances so they don't need to request more federal money in the future.

Since receiving federal funds from TARP, banks that have received taxpayer funds have been pressured to cut down on excessive spending... they have been pushed to limit CEO pay, reduce unnecessary spending and perks, cancel orders on executive jets, and sell the planes they already have. There has been talk of the government making those austerity measures mandatory on any organization that accepts TARP funds.

If we're going to make those kinds of demands on banks that accept TARP money, I think it is absolutely reasonable to make similar demands of austerity on states that receive bailout money.

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