by Les Dunaway
In last week’s column we talked about how countries go broke, using some of the European Union countries as examples – Portugal, Ireland, Italy, Greece and Spain – known in the financial world as the PIIGS and how those countries may destroy the European Union.
This week we’ll talk about how similar behavior and results (whooda thunk it?) has brought several of our states to where their economic situation threatens our country.
One might say: “Well, so what if California goes bust? I live in [insert your state].” To understand how that natural reaction is uninformed we need only look, again, at Europe and its PIIGS. How long do you think the Germans, who have footed most of the bill so far, will keep buying really, really shaky debt to bail out [insert your choice of country]. Angela Merkel has barely survived thus far. Are the American citizens of states that have kept their house, more or less, in order going to be willing to destroy their standard of living with the taxes necessary to bail out California, Illinois, … ? Are they going to buy smoke out of Washington that “Oh, it’s only another trillion”. Given the stellar success of the various bailouts to-date, I don’t think so.
Our people will step up to help one another when disaster strikes. However, this situation is much like the house on your street whose owner won’t mow the lawn and leaves garbage on the sidewalk while drinking beer on the porch. How willing will his neighbors be to clean up the mess?
The Broke States
The cleanest list I’ve found of which states are broke [click] also makes a point that we all need to understand – a good bit of the debt is in loans from the Feds for unemployment (the numbers next to each state).
How’d they get that way?
Easy, see last week’s column – they consistently, for decades, spent more than they took in. Also, they took on long term obligations and did not fund them – the the political jargon, they “kicked the can down the road”. In my words, they mortgaged their children’s and grand-children’s futures!
The Not-Broke States
Why are some states not in trouble or in less trouble. Mostly by keeping government out of things better done by the private sector and operating on user fees rather than taxes. The 2010 census also showed that people are migrating to states with no state income tax.
Under current law, cities and counties but not states can declare bankruptcy. A number of publications have raised the idea of allowing state bankruptcies – Heritage Foundation Weekly Standard Politico New York Post