Friday, February 18, 2011

Rules blocking States from deficits and debt are dumb

From the little I understand and some moderate research, it appears that only Vermont is allowed to govern itself like a real soverign government, with every other state having some level of "balanced budget" requirement baked in.  Some of these are only a requirement that the Budget proposed by the Governor be balanced, some require the Budget plan passed to be balanced, but most others go furthest and require the actual budget as spent to balance every cycle (sometimes two years).  That last covers 37 states so it's not like some small group of ultra-red states. 

This is all deeply stupid and the cause of a great deal of misery happening today.  In Wisconsin, the misery is a deliberate strategy by conservatives and who are happy to have the excuse, but in other States from Califnornia to New York I am not convinced this is the case.  Even if it is, again, why give the politicians such a convenient excuse to hide behind?  There are already enough people out there who are eager to afflict the afflicted, why provide the get-out-of-blame free-card?

Keep in mind that many states also have rules requiring supermajorities to raise taxes so even if you get the occasional governor like Ryan Quinn in Illinois who is actually willing to increase taxes as at least part of the solution, it will often be out of reach anyway.

Canada has 13 provincial level governments (3 are technically territories but they act like provinces) ranging from tiny (Nunavut and PEI) to Ontario, Quebec, Alberta and BC which are comparable in size to many medium and larger US states (Ontario is biggest at 12M people) and all are able to run deficits and debt as their elected governments see fit.  They have no supermajority requirements for raising taxes either.  Luckily for us, this is guaranteed in our federal constitution.  Provinces can pass laws requiring balanced budgets, but the next government is typically free (and willing) to repeal such laws.

It's not utopia of course, most of the provinces have debt and in some cases the levels are a long term concern, but we have been able to ride out the Great Recession without massive public sector layoffs and other cretinous stupidity in service of absurd rules.  As far as I know of, the last time a province defaulted in Canada was during the Great Depression...and it was Alberta, currently swimming in oil money and in no danger of a repeat (though they might drown in a tailings sludge).

As I think about this now, I think this sort of thing is also a big reason why Canadian provinces are so much more powerful within Canada than States are in America.  Last time I checked, Canada's provinces actually account for more collective spending power than Ottawa.  In the States, Washington is something like 70% of the State/Federal combined spending.  Not that I'm a big proponent of "state's rights" as having strong sub-federal governments leads to its own set of problems but all these rules hamstringing State govenrments are a big reason why Washington can push them around on things like speed limits and the drinking age. Not that conservatives are generally sincere in their support of States' rights, but still a factor worth considering.

For what it's worth, Australian States also don't seem to be bound by such rules and I've not read of any great fiscal crisis or looming debt default at the State (or Federal) level there either.  In fact, this freedom of democratic government action certainly helped the government of Queensland deal with the massive floods by passing a flood tax to help cover the costs of the crisis. 

California took a big step forward in 2010 when it passed Proposition 25 and can now pass the State budget on simple majorities.  These measures can pass, and for progressives determined to focus at State level improvements, you can pretty much pick any state on this one.  There will be future recessions and even future depressions and requiring governments to balance their budgets in times of revenue crisis and weak economies has proven horrendous to all the people who can least survive it.  This needs fixing.  States should not be reliant on whether Presidents Snowe, Collins and Specter feel like allowing federal aid in order to avoid having to do stupid things like privatize parking revenue or turn off street lights.  Aside from hamstringing the economic recovery, these things are just bad for the people who have to live through them.

And Vermont?  I doubt the phantom bond vigiliantes are about to unleash their flying monkeys over a debt-to-gdp ratio of less than 20%.


  1. thanks for the canada perspective daniel. things seem much more civilized up north. especially when compared to our massively screwed up situations...

  2. "Keep in mind that many states also have rules requiring supermajorities to raise taxes so even if you get the occasional governor like Ryan in Illinois who is actually willing to increase taxes as at least part of the solution, it will often be out of reach anyway."

    Ryan? Do you mean Quinn?

  3. Yes Quinn, sorry I must have had Ryan on my mind from writing about Illinois and the Death Penalty awhile back.

  4. Cretinous stupidity. Which we export, unfortunately. On the fortunate side, though, the good sense of Canadians seems to be largely impervious to the evil intentions of our ideological export industries. If only we could borrow some of that good sense down here.

  5. Trouble with the new California measure is that now we can pass State budgets with a legislative majority, but we cannot pays taxes without two-thirds of the legislature. So, in practical terms, California can ONLY cut in order to balance the budget.

    Think of it -- we made this madness by majority vote! Backed by the right wing billionaires of course. /snark

  6. I didn't realize. Yeah, that is crazy. No wonder Brown is still cutting.