Louis DeBroux / May 13, 2020

Locked Down Blue States Demand Another Bailout

“Why should the people and taxpayers of America be bailing out poorly run states?”

House Democrats have released their latest Wuhan virus relief bill, a gargantuan goodie bag of “free” money and far-Left political priorities.

Clocking in at a cool $3 trillion — roughly double what the federal government has already spent on coronavirus relief — the Democrats’ bill gives another $1 trillion bailout to state and local governments. The House bill stands little chance of passing the GOP-controlled Senate. McConnell has already rejected any “blue-state bailout,” stating, “We do want to help [states] with expenses that are directly related to the coronavirus outbreak. But we’re not interested in helping them fix age-old problems that they haven’t had the courage to fix in the past.”

McConnell is referring to the immense pressure from Democrat-led “blue” states that, through decades of reckless fiscal policy, now face economic collapse. Obviously, politicians in those states see the coronavirus pandemic as an opportunity to escape the consequences of their irresponsibility.

To be sure, this pandemic has caused significant pain to state and local governments. Pressured to institute lockdowns and “shelter at home” orders, economic activity plummeted, starving them of the tax revenue that funds agencies and programs. Then came a second body blow — increased demand on unemployment and welfare programs at a time when revenue is drying up.

With the viral “curve” now sufficiently flattened, the prolonged shutdown of states is unnecessarily worsening the economic situation.

States like New York, California, New Jersey, and Illinois — all largely run by Democrats for decades — have what one might call an economic “preexisting condition.” Illinois has requested a $36 billion federal bailout, with $10 billion going to shore up the government-employee pension fund that has teetered at the edge of collapse for years. The state wants another $9.6 billion in direct aid for cities and $15 billion in “unrestricted assistance,” meaning the state can spend it however it likes. Only $1 billion is earmarked for healthcare for the poor.

New York, New Jersey, and California also face massive deficits due to decades of irresponsible Democrat spending and vote-buying. California’s unfunded liabilities are a staggering $1.5 trillion, with CalPERS and CalSTRS (public employee/teacher pension funds) alone accounting for a nearly $200B deficit compared to promised payouts. These government-employee benefits range from 30%-100% higher than those of the private-sector employees who fund them through their taxes.

President Trump was absolutely right when he demanded to know, “Why should the people and taxpayers of America be bailing out poorly run states … and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help?”

Indeed, these populous Democrat states brag about how much richer they are than the lowly red states in the South and Midwest. So why are New York and California now demanding a bailout from farmers in Georgia or ranchers in Kansas?

This is especially true when Democrat leaders openly flout their irresponsibility. Congressman Jerry Nadler (D-NY) flippantly declares, “I’m not concerned, frankly, about borrowing money by the trillions.”

And therein lies the problem. Democrats have escalated spending for decades, and far too many Republicans have paid lip service to fiscal restraint while voting for endless continuing resolutions (no one passes budgets anymore) and periodic “stimulus” bills.

State and local governments face an immediate $500 billion revenue shortfall due to the coronavirus pandemic, but the long-term unfunded liabilities are a mind-boggling $5 trillion, on top of a $25 trillion national debt. In financial crises like we now face, the options are to raise taxes on a shrinking number of working Americans (further depressing economic activity), or make drastic reductions in government services, creating a different set of problems, as government employees are laid off, growing the ranks of the unemployed.

What is certain is that a federal bailout will not fix the financial crises in states that have acted irresponsibly for decades, and adding a sea of red ink to an existing ocean of red ink will only compound the problem exponentially.

There is no resolution to this crisis that doesn’t involve pain and sacrifice, but the level of pain can be managed and mitigated by sound fiscal policy and by not rewarding bad behavior. Unfortunately, rewarding bad behavior is the essence of modern politics. For as socialist George Bernard Shaw smugly noted, “A government that robs Peter to pay Paul can always depend upon the support of Paul.”

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