Cantor to states: Don’t expect a bailout

It’s a sign of the times that Rep. Eric Cantor (R-VA) even had to explain this to anyone.  The federal government has a $14 trillion debt and a $1.3 trillion deficit, faces massive crises in entitlement programs, and needs to figure a way to bail itself out.  Cantor more or less made it official yesterday, regardless:

Cantor flatly rejected any changes in the law that would allow state governments struggling with record budget deficits brought on by the economic recession and rising pension costs to restructure debt, including allowing them to declare bankruptcy.

“I don’t think that that is necessary, because state governments have at their disposal the requisite tools to address their fiscal ills,” the majority leader said, before going a step further.

“I think some … have mentioned this Chapter 9 equivalent for states is somehow going to stave off some kind of federal bailout — we don’t need that to stave off a federal bailout. There will be no bailout of the states,” Cantor said. “States can deal with this and have the ability to do so on their own.”

That’s true, but it was just as true two years ago.  At that time a Democratic-controlled Congress passed the Porkulus plan that consisted in large part of bloc grants to states, ostensibly to generate jobs.  What it did instead was allow states to paper over huge budget gaps in the short term, while giving the White House the ability to claim that they had “saved” public-sector jobs.

Even that might have turned out less disastrously had the states taken advantage of the gift and started making the cuts necessary to restore their fiscal health.  By this time, austerity measures and renegotiated contracts could have pulled the states out of their own budgetary crises with relatively little pain, thanks to the big Congressional subsidies in 2009.  Instead, as was utterly predictable, states spent the money maintaining the status quo, figuring that state bailouts were like Lay’s Potato Chips, and that Congress and Barack Obama couldn’t just stop at one.

Unfortunately for those short-sighted states, the people revolted at the notion of massive bailouts and federal profligacy.  Washington never did have the money for these bailouts in the first place, and now a new Congress wants to focus on its own mission of restoring some sanity and health to the federal budget.  States now have to make their own difficult and painful decisions on spending, the size and nature of government, and fiscal responsibility.  The credit card has been revoked.

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David Strom 10:41 AM on February 02, 2023