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There's no doubt that this pandemic-induced recession is hitting states hard. But that's no reason to bail them out, especially when many failed to prepare for emergencies, which are inevitable.
States today are dealing with a huge mess because of a sudden and steep reduction in their revenues while their pandemic spending is going up. But lost in the lamenting about the states' misfortunes is the fact that politicians in these states spent the last decade bloating their budgets rather that cutting spending to be better prepared for crises.
Stories abound about the sorry condition of state and local government finances. A recent report in The Wall Street Journal explains, "State and local governments from Georgia to California are cutting money for schools, universities and other services as the coronavirus-induced recession wreaks havoc on their finances," and, "Governments have cut 1.5 million jobs since March, mostly in education, and more reductions are likely barring a quick economic recovery."
Yes, recessions are difficult. Millions of employees in the private sector have recently lost their jobs. In fact, traditionally, private sector employees are hit harder by recessions than state and local government employees are. Business owners, too, understand that recessions are terrible for one's bottom line. Millions of them have watched as their livelihoods were pulverized in the span of a few weeks. Yet these business owners, after being allowed to delay their tax payments for a few months, are still on the hook for paying the salaries of government workers.
What's more, these stories about state and local governments being hit hard rarely explain that politicians in those states failed to responsibly budget for crises. Such rainy-day budgeting should not have been that difficult, given that the country was experiencing an unprecedented decade of economic growth when rivers of revenue poured into state and local coffers. More revenue makes it easier to beef up rainy-day funds, which then helps fill in budget gaps. While some states have learned their lessons from the last recession, most states did not.
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