Veronique de Rugy (one of my all time favorite people) and Tad DeHaven of the of the Mercatus Center have written a wonderful article about why there should not be state bailouts (pandemically-induced or otherwise) It is a great read here:
A key thing to note is about Veronique’s observation of why New York’s perennial claim that it sends more money to Washington than it gets back. The situation occurs because 1) the federal tax code is very progressive (thanks to NY and the other liberal states that insist on it) and New Yorkers have high incomes, and 2) NY receives relatively less money in the form of federal contracts and federal employee wages: (my note: this is logically caused by the fact that New York has made itself such a terrible place to do business -including sky-high costs and ridiculously burdensome regulation and taxes- that it can’t compete for these projects. Furthermore, the fact that New York taxpayers send more to Washington than they get back has nothing to do with why the government can’t balance its budget. The government is not the taxpayer. The states send no money to Washington – their earners do.
The states often argue that if corporations can get bailed out, states should as well. But note, that before there is ever a consideration of a corporate bailout, the corporation has taken dramatic steps to stem the problem, chopping costs, revising operations, and demonstrating that with the bailout funds the entity will again be viable. There is also a promise to repay the amounts with a significant return to the government.
But what about the states? There has been virtually no movement to reduce their budgets – in fact, NY continues to show that it is not only refusing to lay off personnel whose jobs are no longer viable, but they intend to go ahead with scheduled increases even to employees who are not working. No company would dream of requesting a bailout in those circumstances. And without serious and immediate cutbacks, how would the states ever have the capability to repay any bailout funds?
Many states have failed their fiduciary responsibilities to their citizens. If these lawmakers requesting bailouts are so concerned about their states, they should aim to reduce the size and scope of their governments, and the wildly out-of-control spending that created revenue shortfalls prior to the pandemic, instead of expecting others to subsidize their irresponsibility.