Earth to Congress: It's time to stop defending your profligate earmarks and ignoring runaway entitlement spending. Take a cue from the states, which generally must keep balanced budgets. Out there, fiscal responsibility is still an honorable trait.
Most states learned the hard way after the booming '90s and during the budget-busting recession of 2002 that belt-tightening is needed even in fat years. The latest report from the National Governors Association and the National Association of State Budget Officers shows 37 states with tax revenues exceeding their budget spending by about 5 percent, with 10 more states on track to do the same.
Just four years ago, most states were scrambling to cut about $15 billion collectively from budgets after the bursting of the high-tech economic bubble.
Of course, the current, healthy economic growth in the US has once again generated high tax revenues that are filling state coffers with cash. And the temptation is still strong among many state politicians to spend that surplus on programs that may not look so affordable when the lean years return. Indeed, average spending for the states is the highest since the go-go year of 1999. But despite that, most statehouses are being more cautious, trying to keep the budget reserves they have built up and reduce long-term debt. And despite a stronger tendency among governors to propose modest tax cuts, the actual tax increases in dollar terms are exceeding tax reductions.
What's more, with elections this fall and 36 governor seats up for grabs, no governor is offering large tax cuts. That may be largely due to the enormous financial burdens facing states in funding Medicaid and pension obligations. (Medicaid makes up nearly a quarter of state spending, and the obligations are expanding.)
No longer can candidates promise the moon when the fiscal stars no longer align.
This year's state elections will be a crucial test for voters in deciding whether they want to encourage leaders who actually practice fiscal restraint during robust times (unlike those who talk about it in Congress but then sneak pork- barrel projects into budgets with no debate).
The short-term nature of election cycles plays to the squandering instincts of pork-minded politicians, and it's up to voters to take the long view on how state spending can help or hurt their local economy, and to ensure their state keeps rainy-day funds on hand. Voting for candidates who simply bring home the bacon to their districts is a sure way for a state to go to the fiscal hogs.
The state governments' long-term obligations – in health, education, and infrastructure – are becoming more expensive. And yet the need is growing for states to sustain tax rates that will keep and attract business. Balancing the two needs over decades requires a kind of bipartisan compromise often practiced in many statehouses.
Many states have learned a lesson in recent years in avoiding feast-and-famine budgeting. Congress, which can just raise the national debt to accommodate bigger budgets, needs to hear from voters that it must also keep spending in check.