Jonathan Williams, the chief economist and executive vice president of policy at the American Legislative Exchange Council, joins The Daily Signal Podcast today to talk about why states should say no to a federal bailout, if federal bailouts affect states' rights and sovereignty, if federal bailouts potentially affect tax rates, and much more.
If we believe in that principle, and everyone who does believe in that principle, or should believe in that principle, should be very concerned about any time the federal government comes in, perhaps even with the best intentions, to send money to the states to bail them out over perhaps poor decisions that they've made in the past, instead of letting states govern and make some of those difficult decisions themselves.
Whenever you have that federal influence, of course, states cede control to the federal government, and these strings that come with these federal dollars oftentimes outlive the federal dollars, as we've found out with the last time we had a bailout of the states during the Obama era.
Ten to 11 years ago when we saw the so-called shovel-ready projects during the Obama era and the financial crisis, there was a group of states, and I think it's important to differentiate between all states and perhaps some states that asked for bailout funds or some legislators within those states.
Every year in "Rich States, Poor States," our report, we point out the states like Utah, and Texas, and Tennessee, and Florida, states that are governed well and keep spending in check.
So that's been one of the big concerns of fiscally prudent state lawmakers is, there's no such thing as a free lunch, as Milton Friedman taught us years ago, is that the federal government will require all kinds of new regulations and put requirements on states when it sends dollars to states.
Then there's the moral hazard problem where, if they're expecting a federal bailout every time this happens, more federal handouts to the states, then I think you have to ask yourself, does the politician in a state like Illinois have an incentive to actually ever behave in a fiscally responsible way in the future, if they can just count on a federal handout and federal bailout every time that we have some sort of a national downturn?
https://www.dailysignal.com/2020/05/01/why-states-should-say-no-to-a-federal-bailout/
If we believe in that principle, and everyone who does believe in that principle, or should believe in that principle, should be very concerned about any time the federal government comes in, perhaps even with the best intentions, to send money to the states to bail them out over perhaps poor decisions that they've made in the past, instead of letting states govern and make some of those difficult decisions themselves.
Whenever you have that federal influence, of course, states cede control to the federal government, and these strings that come with these federal dollars oftentimes outlive the federal dollars, as we've found out with the last time we had a bailout of the states during the Obama era.
Ten to 11 years ago when we saw the so-called shovel-ready projects during the Obama era and the financial crisis, there was a group of states, and I think it's important to differentiate between all states and perhaps some states that asked for bailout funds or some legislators within those states.
Every year in "Rich States, Poor States," our report, we point out the states like Utah, and Texas, and Tennessee, and Florida, states that are governed well and keep spending in check.
So that's been one of the big concerns of fiscally prudent state lawmakers is, there's no such thing as a free lunch, as Milton Friedman taught us years ago, is that the federal government will require all kinds of new regulations and put requirements on states when it sends dollars to states.
Then there's the moral hazard problem where, if they're expecting a federal bailout every time this happens, more federal handouts to the states, then I think you have to ask yourself, does the politician in a state like Illinois have an incentive to actually ever behave in a fiscally responsible way in the future, if they can just count on a federal handout and federal bailout every time that we have some sort of a national downturn?
https://www.dailysignal.com/2020/05/01/why-states-should-say-no-to-a-federal-bailout/
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