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Grasshopper States

The technology recession and rising Medicaid costs have taken a heavy toll on most state governments. Two-thirds are expected to make searing spending cuts and impose $8.3 billion in new taxes.

Before governors cry for help from Washington, they should learn from states such as Colorado that weren't dazzled during the booming '90s to spend and spend. Fiscal restraints are necessary through thick and thin.

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Overall spending by states rose by some $240 billion over the past 12 years - twice the rate of the federal budget - and much of that was for new programs that now look unaffordable.

That perspective should help the grasshopper states go back and look at their spending priorities before they grew fat on the rise in sales, income, or corporate tax revenues that seemed as if they would never end.

The hard landing for state budgets can also serve in forcing deep reforms on states, and not just spending cuts.

States are laboratories for innovation, such as in welfare reform. Governors can now try to bring about reform in Medicaid and other programs that need it. They might also shift their tax structures - without raising the total tax burden - to seek greater revenues in healthier parts of the economy, such as services.

Keeping taxes and spending in sync with the economy is what good governance calls for. Politicians need to keep the perspective of long-term trends and economic cycles, not the next election, in view. And voters should impose constitutional constraints on the raising of taxes and spending in states where profligacy is a common practice.

Washington should pay for mandates it imposes on states, but states drowning in red ink need first to reflect on why they drank so much from a well that was bound to go dry.


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