Louisiana is among the states hardest hit by the COVID-19 pandemic, so it’s understandable why Sen. Bill Cassidy wants the federal government to provide $500 billion in additional funding to state and local governments.
He calls it a SMART fund (State and Municipal Aid for Recovery and Transition). But there’s nothing smart about it.
Many states — and Louisiana is one of them — have been living beyond their means for years, spending extravagantly, creating barriers to growth, failing to set aside money for emergencies, and borrowing to make up the difference.
Louisiana ranks 32nd in per capita debt, with a per person debt load of $3,609, worse than every neighboring state. That’s double the per person debt in Arkansas, for example.
This isn’t about pitting one state against another. But it is worth asking how some states succeeded where others failed, because that gets to the heart of why a bailout is a bad idea.
The precarious position of state finances in Louisiana, and in places as diverse as Connecticut, New Jersey, Alaska, Hawaii, Washington, and Illinois, is the result not of the coronavirus pandemic but of years of wasteful spending and bad decisions by lawmakers.
Taxpayers should not have to bail out the bad decisions of politicians.
Louisiana’s estimated share of the first $1 trillion in COVID-19 aid is $1.8 billion. That’s almost four times the $500 million Cassidy estimates state revenue will fall short. And that doesn’t include the $500 billion available to states in loans from the Federal Reserve.
That $1 trillion can’t be used to offset lost tax revenue during the economic shutdown, but it does insulate states against unexpected pandemic costs and gives them enough breathing room to set priorities for other spending on their own.
And that is exactly what states should be doing now.
Instead of looking to Washington for another $500 billion bailout — or the $3 trillion behemoth just passed by the House — states should look to get their own houses in order by resetting spending priorities and eliminating barriers such as outdated occupational licensing requirements that get in the way of growing the economy and creating jobs.
“How can we expect state and local governments to pay for police and fire protection and sanitation services when their tax base has collapsed?” is the question Cassidy asked.
So my questions for Sen. Cassidy are: Why would those be the first thing you cut spending on? Shouldn’t they be the last?
The job of state and local policymakers is to make just those kinds of decisions. This is more important than that. That is optional, this is mandatory. Separate the needs from the wants and fund the needs first.
Sen. Cassidy is no rookie. He’s an experienced legislator, a medical doctor, and a smart man who ought to be above engaging in the Washington Monument Syndrome — the cynical practice of offering up the most popular programs for cutting, knowing the public won’t stand for it, and thus preserving programs the public would support trimming.
The millions of newly unemployed Americans understand this principle. When the paychecks stop, you focus on what matters most.
Pouring money into the states would simply encourage more bad behavior. Why should governors and state legislators make the tough decisions when they know they’ll be bailed out by the taxpayers of other, better-managed states?
“We must protect Americans’ financial future and we can’t do that if garbage is piled up on the streets because local governments are broke,” Cassidy said.
That’s a good argument for local governments prioritizing the funding of garbage pickup. It is not a good argument for bailing out reckless politicians.
James Lee is interim state director of Americans for Prosperity-Louisiana.