STATE BUDGET CRISIS EXEMPLIFIES ANOTHER FAILURE OF THE RECOVERY ACT
In doing a recent study of state governments, I discovered that nationwide, state government deficits are increasing to $115 billion in 2010. This is up from $68 billion in 2009. It appears as if the state governments got drunk from the tax revenues of the excesses of the last economic bubble. The Recovery Act worked to prop up these spending machines by pumping billions in debt issued financing into these states.
Now, the “gravy train” has run out and it appears that state deficits are going to steepen dramatically over the coming year and some estimates suggest it could be worse in 2011. So, should we have faced the high spending issues in 2009, or should we have passed an annual Recovery Act and borrow federal funds until the problem “corrects itself?”