State Of The States

We’re so used to getting our bad news with a New York or Washington tag line, it might be appropriate to look at the news that’s coming out of our state capitals. No, not just the fact that the governor of South Carolina took a South American vacation—and he’s now spending a little family time explaining things to his wife.
Nor the fact that Alaska’s Governor Palin has just announced she is resigning at the end of July. Most assume that this is to free her up to launch a presidential campaign three years from now; some suggest that dropping the governorship this early is a bit foolish.
In any case it seems reasonably certain that she has no plans to quietly fade away. She burst upon us like a sun flare ten months ago, and she seems to enjoy the spotlight. I would not be surprised that there might be an element of wanting to show the Republican nabobs who treated her with such contempt last year, not least John McClain, that she is too a political force to be reckoned with.
(You do have to wonder what McClain was thinking last August. Or if he was thinking at all—beyond the desire to give the Democrats a momentary jolt. [It was very momentary.] But if I were Palin, I would feel used and abused. Not least because the Party first demanded I go shopping to upgrade my wardrobe—and then demanded all the clothes back. That’s adding injury to insult.)
Then there’s California where the governor announced this week that he would likely need to issue I.O.U.s in lieu of checks for welfare recipients, contractors, and a whole bunch of other people the state owes money to, in and out of state.
Can you imagine going to a grocery store and handing the cashier an I.O.U. from the State of California in the condition it’s in!? (I recall that my aunt took a teaching job in the State of Michigan back in the 1930s for six hundred dollars a year. They paid her $300 in cash that year—and gave her a warrant for the other $300. This is not a new idea—it’s just startling that we are back to it again.)
“BusinessWeek” suggests that the huge size of the California economy (one of the ten largest or so in the world) and the huge size of its deficit could slow down recovery for the entire nation. Unfortunately, unlike Washington, California has no printing press for money.
Speaking of California—and Michigan. The respective governors are trying to work out a deal whereby excess California convicts are sent to Michigan for incarceration in prisons Michigan can no longer afford to keep open. California will supposedly pay for this service—with what? I.O.U.s?
They are closing down the correctional facility in nearby Muskegon, Michigan, for one. Michigan is rushing to release prisoners as soon as they’ve served their minimum sentence—regardless of how dangerous they may be.
In the past few years Michigan, once an industrial hub of America—and the world, has lost around a fifth or even a quarter of its jobs. This is primarily due to the collapse of the auto industry. While it isn’t completely true that Michigan is a one company state, it’s close.
Now as General Motors sits in bankruptcy, lawyers are playing chicken with the government. One lawyer who represents some small bond holders was quoted today as saying that he can hold out for more money because the government would never let GM go down.
He hopes. But any way you cut it, a lot of people who were born in Michigan are going to have to move elsewhere if they ever plan to work again. Oh yes, they just laid off a raft of State Police—as tax income falls, there’s less money for fripperies like police protection.
A whole list of industrial states—Illinois, Indiana, Ohio, to name a few—are in serious trouble because of tax shortfalls due to declining industrial production, especially automotive.
Of course every state is saddled with a series of unfunded federal mandates. That means that when Washington gets a brilliant idea for making education—or some other state function—more complex and more expensive, it sends no money to pay for the new program.
There are a lot of federally mandated services out there that states MUST provide—and must also pay for. If they plead insolvency, they will be deprived of other federal monies as a penalty. This has been a growing phenomenon since the 1970s.
These mandates add to state grief. The states often pass these mandates on to local governments who must then pay for them without any state help. (That, boys and girls, is one of the reasons my property taxes keep going up, just like yours.)
For decades now this burden of unfunded programs mandated by Washington has grown heavier and heavier. (Some of Obama’s proposals will no doubt result in more of them.) It will not get lighter, no matter what the economy does.
Washington will volunteer no additional monies; it is extremely unlikely to repeal any of the programs or their mandates. At some point the whole upside down pyramid may just collapse.
Meanwhile, Palin has set her sights on Washington and California would like to ship a few hundred undesirables to Michigan. And this is the state of only a few states.