Ryan Streeter
I’m glad George Will wrote his Sunday column on the state budget crisis. This looming problem should be the next frontier of the tea party’s rebellious fervor. With $3.3 trillion in unfunded pension liabilities, states are in a bad place, and the worst offenders are leading us to another round of bailouts that will make the bank bailouts and wasteful stimulus spending seem like small ball.
Will spotlights Devin Nunes’ (R-CA) bill that would require greater transparency from states regarding their pension funds. States that can’t comply lose eligibility for federally backed bonds (bonds that states issue that are exempt from taxation).
The bill also states that the federal government will not bail out states. I think this is the most important provision. As we’ve seen in the financial crisis, banks’ implicit assumption that the federal government would bail them out affected their behavior (badly). States are no different.
The bill would go a long way to conditioning state behavior before things get completely out of control.
I would suggest adding an additional provision: prohibit states from using federally-backed bonds to fill holes in their budget that they should be using tax revenue to pay for. A number of states have used bond issues to cover shortfalls in pensions, employee pay, and other areas that bonds just simply shouldn’t be used for.
Nunes should get some reinforcement from the new crop of Republicans in the House. If more Americans knew what kinds of behavior and decision-making are driving the state budget crisis, my guess is the tea party would enter a productive phase 2.
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