The following in South Carolina Governor Mark Sanford’s (R) editorial that was posted in the Wall Street Journal, with my thoughts and analysis spread throughout:
I find myself in a lonely position. While many states and local governments are lining up for a bailout from Congress, I went to Washington recently to oppose such bailouts. I may be the only governor to do so.
You’re better than my governor, Governor Jennifer Granholm, one of the people leading the charge for the auto bailout right now.
But I suspect I’m not entirely alone, as there are a lot of taxpayers who aren’t pleased with Christmas coming early for politicians. And I hope these taxpayers make their voices heard before Democrats load up the next bailout train for states with budget deficits.
Several questions led me to oppose bailing out the states. They are worth asking, even if you supported bailing out Wall Street.
Who bails out the “bail-outor”?
Washington is short on cash these days and will borrow every dime of the $150 billion to $300 billion for the “stimulus” bill now being worked on. Federal appetites may know no bounds. But the federal government’s ability to borrow is not limitless. Already, our nation’s unfunded liabilities total $52 trillion — about $450,000 per household. There’s something very strange about issuing debt to solve a problem caused by too much debt.
A very good question. The answer, in my opinion, is eventually the taxpayers. If we keep this set of bailouts going, we’ll ultimately just crumble the economy and economic infrastructure. Heck, there may not even be a United States to bail out any more if we keep this up. We’re entering dangerous territory economically, and if we aren’t careful, it may cost us permanently.
Do you now have to be a financial “bad boy” to win?
Community bankers tell me that they are now at a competitive disadvantage for being careful about who to lend to, because others that were less disciplined will get a federal bailout. This is also true for states. Those that have been fiscally responsible will pay for or lose out to the big spenders. California increased spending 95% over the past 10 years (federal spending went up 71% over the same period). To bail out California now seems unfair to fiscally prudent states.
But this has been the whole mindset since the beginning. “I’ll take the risk, and if I suffer, they’ll HAVE to bail me out.” I’ve been warning about this from the beginning! But economically/fiscally dumb and irresponsible lawmakers in Washington have given in and now think, “If __________ fails, the whole economy will suffer, and we can’t let the economy suffer.” Let companies go bankrupt. Let people lose their homes. It’s called a free market. Companies and people never should’ve bought more than they could afford or taken risks that they couldn’t handle.
Was the economist Herb Stein wrong when he said that if something cannot go on forever, it won’t?
Medicaid grew 9.5% annually over the past 10 years. That’s unsustainable. But if Congress opens the checkbook now, there will be no reform.
Isn’t government intervention supposed to be the last resort and come only when it can make a difference?
EXACTLY! And even then, in my opinion, the government probably shouldn’t intervene. But it’s visible in the proposed auto bailout: Some in Congress are saying that the auto companies shouldn’t try bankruptcy first (even Represesntative Joe Knollenberg [R-MI9] said this!).
In 2008 bailouts became the first resort. Over the past year the federal government has committed itself to $2.3 trillion (including the tax rebate “stimulus” checks of last February) to “improve” the economy. I don’t see how another $150 billion now will make a difference in a global slowdown. We’ve already unloaded truckloads of sugar in a vain attempt to sweeten a lake. Tossing in a Twinkie will not make the difference.
That’s a really good analogy.
However, there is something Congress can do: free states from federal mandates. South Carolina will spend about $425 million next year meeting federal unfunded mandates. The increase in the minimum wage alone will cost the state $2.6 million and meeting Homeland Security’s REAL ID requirements will cost $8.9 million.
Based on what I saw in Washington, the bailout train is being loaded up. Taxpayers will have to speak up now to change its freight, tab or departure.
I feel that it may already be too late. While Congress won’t give in to everybody who asks for a bailout, I think they’re going to give in to a lot of them, and who knows how detrimentally that will affect our economy.
Mr. Sanford, a Republican, is the governor of South Carolina.
So, there you have it. Governor Sanford’s op/ed. I couldn’t agree more with what the Governor said. We need more people like him (although I don’t agree with all of his stances, I think he’s absolutely right when it comes to this issue).
If we continue these reckless bailouts, we’re all going to suffer. And we may not be able to recover.
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