Monday, November 30, 2009

If You Burn Through Your Allowance, And Then Some....


How many times should mom and dad simply hand you more money? Paul Krugman argues,
One [job creation or preservation] measure would be another round of aid to beleaguered state and local governments, which have seen their tax receipts plunge and which, unlike the federal government, can’t borrow to cover a temporary shortfall. More aid would help avoid both a drastic worsening of public services (especially education) and the elimination of hundreds of thousands of jobs.
And he's right. And it may be a fair retort that "this is not the time to raise taxes". But at the same time, I don't approve of simply handing more money to the states without demanding a change in the status quo.

A lot of the problems states are facing arise from tax policies that are short-sighted and regressive, and a lot of states have been (and will continue) to make things worse by shifting part or all of the cost of present programs onto future budgets, or by selling off forms of revenue generation (e.g., lotteries, roads, parking meters, prisons, bond issues, etc.) to balance this year's budget on the backs of future generations. It really makes me want to issue a parental, "You should have planned for this before you spent all your money," lecture.

If more federal aid is offered to the states, it should have clear strings attached: tax reforms likely to create and sustain a balanced budget starting in, let's say, 2011. The CBO can crunch the numbers.

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