The states of this nation are facing a financial crisis

There was an article today, I believe it was in the NY Times, about libraries across the country having to cut hours, lay off staff, or close branches. This at a time of high unemployment, when more people need to use libraries.

As long as people accept the idea that all taxes are wrong, services will be damaged. But politicians are elected because they promise to cut taxes, and voters tend to pass tax-cut initiatives. This disconnect between what people want (in services) and are willing to pay for (in taxes) means things will continue to deteriorate.

US Takes out Debt-consolidation Loan
WASHINGTON, DC; Plagued by late fees, high interest rates, and harassing creditors, the U.S. took out a debt-consolidation loan Monday, combining the nation's $6.1 trillion debt into a single, easy monthly payment.

"My fellow Americans, we have just taken the first step toward regaining control of our finances," said President Bush at a press conference. "Thanks to a joint arrangement between the Treasury Department, the Federal Reserve, and E-Z Debt Services of Baltimore, we are finally on our way to freedom from debt."

As of press time, the national debt stands at $6,144,393,982,061.52.

Under the terms of the consolidation, E-Z Debt Services will repay the nation's estimated 45,000 creditors, a majority of whom are foreign investors, insurance companies, banks, and other privately held entities. In return, the U.S will make a single monthly payment of $9.26 billion, adjusted for inflation, to E-Z Debt every month for the next 70 years.

"We are proud to enter into this arrangement with the federal government," E-Z Debt spokesman Phil Rizzo told reporters. "We know how hard it is when you're buried under a mountain of bills with seemingly no way to get out. When you don't know where else to turn, E-Z Debt is there to help get you back on your feet."

The government first became aware of E-Z Debt Services on July 10, when Sen. Max Baucus (D-MT) happened to see a commercial for the company while watching late-night television. Two days later, President Bush saw the same ad during a 3 a.m. M*A*S*H rerun.

According to White House press secretary Ari Fleischer, Bush was sitting at his desk clutching a fistful of past-due notices when he saw the ad.

"He was holding all these unpaid bills, and tons more were piled high on his desk, including a three-month-old bill from Lockheed-Martin for $5.3 billion worth of jet fighters," said Fleischer, who was in the Oval Office working late at the time. "He raised the handfuls of bills above his head and shouted, 'I can't take it anymore!' That's when the ad came on."

After extensive meetings between E-Z Debt officials and the Treasury Department, an arrangement was reached which provided a manageable payment plan with no threatening phone calls or military invasions from creditor nations.

Though the House Of Representatives swiftly and decisively approved the consolidation plan by a vote of 285 to 103, the Senate took longer to rally the necessary support, debating the issue for weeks.

"I was definitely skeptical about E-Z Debt, as were many of my colleagues," Senate Majority Leader Tom Daschle (D-SD) said. "I'd heard horror stories about those debt services. England used one to get out of a recession in the late '80s, and they're still paying for it."

"But E-Z Debt is different," Daschle continued. "Jim [Smoller], our E-Z Debt representative, sat down with me and the other senators and really convinced us that debt consolidation was the way to go. He was extremely helpful, taking the time to patiently answer all our questions. He even gave us a free quote."

Opponents of the plan charge that it unnecessarily endangers the numerous national assets offered as collateral. Among the valuable properties being put up are Yellowstone National Park, NASA, and the state of Alaska.

"Holding the nation hostage to a single creditor is hardly preferable to the original situation," said Sen. Dianne Feinstein (D-CA) during a lengthy Senate debate on the consolidation. "Besides, I am confident that if we just trim a few unnecessary expenses from the budget and somehow get a little bigger GNP, we can climb out of this hole without help. We just need a little more time."

"Okay, so we mismanaged our money a little bit who doesn't every now and then?" Sen. Bill Frist (R-TN) said. "But that's no reason to resort to using one of those get-out-of-debt-now services."

Despite such opposition, ultimately, the Senate's pro-consolidation voices won out.

"In the end, everybody came to see that E-Z Debt isn't just another loan. It's a way to get out of debt without declaring bankruptcy," Daschle said. "Thanks, E-Z Debt. We couldn't have done it without you."

(http://www.theonion.com/onion3827/debt-consolidation_loan.html)

Talking about a disconnect. Here in the city of NY there is a multibillion $ gap in the budget. The mayor is searching for away to make up the short fall through cuts in service and increased taxes. As you would expect the people are up in arms. However the same people are almost demanding that there be no cutbacks on service and that police, firemen, teachers and the like be given increases in pay and benefits since they are underpaid. I often wonder where these economic whiz kids expect the money to come from? Their stupidity astounds me.

When I think about our stupidity about gov't economics, I wish I lived somewhere else, like Sweden (or even Canada), where it seems like people have some sense of responsibility for others. And the security of knowing that there will be help if they need it, too.

The American notion of rugged individualism, which may have made sense on the prairie, is now nothing more than an excuse for selfishness and irresponsibility...

Mr Stillwater
I must be getting a little slow on the up take. When I began to read your post I did not recognize that it was sarcasm. You can just imagine what was running through my mind.

Why exactly, should the Federal government step in? The states have the exact same ability to collect Income taxes as the Federal Government does (plus they have personal property and sales taxes amongst others..). They've all been busy cutting their tax rates in the last few years as well but no one is screaming for them to raise their tax rates. Why is that? Why should the Federal Government raise taxes so that the states can reduce theirs?

Here in MA we have a state deficit of some $500 million this fiscal year but for some unknown reason they are unwilling to tap the multi-billion dollar "rainy day fund" that had been built up in the "boom" years in case of this type of event. It makes absolutely ZERO sense. What the heck is the purpose of this fund if they won't use it to cover shortfalls in lean years? How many other states are sitting on fat bank accounts and screaming that they are broke?

Agreed, fishin', that these are the rainy days for which these funds were meant. And I don't think the feds should step in to save the states and cities. On the other hand, when the federal gov't enacts legislation requiring action by states and cities (take education reform, please), things get a little complicated.

But the same penchant for cutting taxes is present at all levels. OK, we've cut taxes. Now services are being cut. What do we do?

todays headline Rocky Moountain News Denver Colorado "Home Foreclosures up 55%"

IMO, the states at least should look toward their own tax structures. If they cut their own taxes then they should be sucking it up and raising their own before they go screaming for Federal help.

One of the things that made me chuckle in the original referenced article were the quotes form "Mumbles" Meinio (mayor of Boston). As you may be aware from numeroyus comments on Abuz Boston has "The Big Dig" project going on to bury the existing elevated highway through the middle of the city, reclaim the land for public use and have the highway underground. That project is several billion $$ over budget. The constant chant from Meinio has been to put up toll booths on the highways coming into the state of MA to pay for the cost overruns. IOW, he wants people from Albany NY, Hartford CT, Nashua NH, etc.. to foot the bill. The major portion of the highway runs north/south right through the city. Why not put toll booths at the north and south ends of the city right on the highway being built and let the people that actually use it pay for it?

He also pushed to have the 2004 Democratic Party Convention held here in Boston (and Boston was selected to play host city) but now he wants everyone else to pay for the facilities to be built/refurbished to host it. Why should everyone else pay when the only place that will benefit financially will be Boston?

IMO, the Federal $$ should be refocused (and fully funded) on things that were mandated by the Federal government. The programs and projects that are initiated by the Cities and States should be fully funded by them.

Right now it seems the City and State politicians are all to afraid to expend their political clout and raise their own taxes and instead want to find someplace else to lay the burden off.

Seems as though politicians of both parties believe that calling for tax increases is a bad career move. In fact, the kiss of death. That's certainly true in Washington state. The legislature (and governor) were too timid to hike the gas tax to pay for needed road repairs, so they sent it to the voters to decide. And of course it was defeated soundly. Don't we elect these guys to make tough decisions that aren't always popular?

I don't think so D'artagnan! I think we tend to elect them for all those campaign promises that tend to enhance our own personal wealth or provide us with our own sense of power. As much as people talk about "social responsibility", when it comes time to vote it's still 99% about "what's in it for me?"

In November one of the refferendum questions here was to eliminate the state income tax and it almost won! I was stunned to see that half of the voters in this state thought they could just eliminate the state income tax and that the money would just appear from yet unseen source.

We did raise the gas and cigarette taxes here but they still see that "rainy day fund" as a sacred cow and won't touch it.

Can't say I disagree, fishin', re why we elect politicians. What I meant was more in the ideal sense: The reason we have elected officials at all is to make tough decisions. The reason we actually choose them is, as you say, because they say what we want to hear.

Voters here do similar things on initiatives. Cut property taxes, then scream bloody murder because services are cut. What's even better is when, in the same election, we passed one initiative to raise teacher salaries and another to cut taxes. Must make sense to someone!

Deepest state deficits in 50 years.
Note that states are raising taxes and going into their rainy day funds. The city of NY which got a double whammy. 9/11 and poor economic conditions raised the real estate tax 18% and in all likelihood will be increasing the bus and subway fares 25%. At the same time they are laying off people in essential services and cutting services in all areas. All these moves will still not solve the fiscal dilemma.


http://csmonitor.com/2002/1227/p01s04-usec.html

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Uncle Sam giveth, states taketh away

Economy could get $50B stimulus in 2003 -- but cash-strapped states could take it right back.
January 3, 2003: 4:12 PM EST
By Mark Gongloff, CNN/Money Staff Writer


NEW YORK (CNN/Money) - President Bush and Congress hope to rejuvenate the U.S. economy this year with a cocktail of tax cuts, spending hikes and other federal programs -- but cash-strapped state governments could water down the federal government's medicine.


http://money.cnn.com/2003/01/03/news/economy/statebudgets/index.htm

The problem is as simple as some of you have been indicating - at least in Idaho. We also face a serious budget shortfall, and our legislators are currently trying to decide how to fix it. Unfortunately, one of the first things I learned when I became a county commissioner is that almost no members of the legislature have previous experience at the city or county levels. The simple fact is that nearly all of these elected officials have no clue as to how local governments supply and pay for the services for which they are responsible by default. This also explains the bevy of unfunded mandates that have been imposed by Congress and legislatures during the past few decades. (I am personally convinced that most members of Congress have experience in state legislatures, which takes me back to my first observation.) The fact is that neither our prominent elected officials or the public in general understand how government should work, so they continue to pass laws and regulations that ensure that it will not. Anybody for bread and circuses?

It's a funny thing, but it seems like most people look at where the government gets its spending money is maybe through an inheritance from a rich uncle. When I was young, they used to teach a class called civics, and they taught all kinds of stuff, like federal government, state government, why it was necessary to vote (which may be why so many seniors vote - we were taught the importance of that).

The governors association has a web site on which all kinds of interesting information can be found. For instance, a while ago many states were complaining that there was a federal mandate to put certain homeland defense practises into play, and that they were promised help that never came. So now, where do they get the money to do this? Along with all those countless other things that make us happen? In the end, they will have to raise taxes, and one of the problems is that the blame for that usually falls upon whatever party is in power at the time.

The stimulus packages negative effect on the states and cities. I guess the constituency in the states is different from that of the federal government. At least in this administrations eyes.
States Fear Double Whammy From Tax Plan

By MICHAEL JANOFSKY

DENVER, Jan. 7 — President Bush's call to eliminate taxes on corporate dividends, a centerpiece of his economic plan, is raising alarm among state and local officials who say it could add to the growing budget pressures on states and cities.
Budget experts were still reviewing numbers today, but said the provision on dividends would cost state and local governments tens of millions of dollars a year in lost revenue.

http://www.nytimes.com/ads/amex_popunder10103.html

In MA, Jane Swift cut, then cut again, then cut AGAIN before leaving office. State funded institutions planned their year with a smaller budget than expected and then their budget got cut again - mid-way through the year. Mitt Romney hasn't said much about what he plans to do. But because he announced that he and his dep govenor wouldn't take a salary, the state senators all forwent their pay increases for this year (or was it term?).

I have seen some truely horrifying cuts (30% cut to the low-income housing authority), special needs funding being dramatically slashed.....