Wednesday, July 08, 2009

Ninety Percent of Stimulus Funds Spent on Bailouts for State Governments   [Stephen Spruiell]

James Pethokoukis links to a GAO report that surveyed 16 states and the District of Columbia to see how stimulus funds are being spent. The study found that 90 percent of the stimulus funds spent so far have gone toward bailouts for fiscally irresponsible state governments. These states made commitments on health care and education spending commensurate to what they could afford during the boom years. When the economy crashed and tax revenues dried up, they had no way to pay for these commitments short of raising taxes, which none of them wanted to do. (Most states' constitutions restrict their ability to run deficits.)

This is what the stimulus was really all about — not creating or "saving" jobs, but preventing states from suffering the consequences of their profligacy. To think that even with this generous bailout, the state of California has been reduced to issuing IOUs... it's just amazing. One positive note: "As of June 30, 2009, of the 16 states and the District, only Texas had not submitted an [State Fiscal Stabilization Fund] application." A lone star above an otherwise dismal landscape.

07/08 02:57 PMShare