We folks who want Congress to run our government responsibly often point to the federal deficit as a chief sign that it is not. There’s a good reason for that — a $16 trillion debt is neither responsible nor fair to those who will have to pay it off one day. However, there is another debt that has run mostly under our radar, a debt built by state governments who has too often clamored to keep up with federal demands for more freebies for more people. Joel Gehrke reports:
California isn’t the only state with a debt problem: States and local governments have over $3.7 trillion in debt, according to a new report from the Treasury Department’s Inspector General for Tax Administration (TIGTA).
“State and local governments have outstanding debt of more than $3.7 trillion dollars in municipal bonds, and hundreds of millions of dollars in new municipal bonds are issued each year,” TIGTA announced today.
The states owe that money to real people who bought those bonds with the belief that our governments were good for it. Whether that belief was well-founded is still an open question. States have looked for a way to legally declare bankruptcy since at least 2011 as their books have filled with more and more red ink. I don’t doubt that any state would duck at least part of its obligation if it could legally do so. State legislators could then blame all the budget cuts and ridiculous tax increases that would follow on the bankruptcy instead of their own selfishness and laziness.
I can’t entirely blame the states, though. Their ability to raise revenue through reasonable levels of taxation has been hampered by Washington’s relentless encroachment into our paychecks. We will only accept a certain percentage of total taxation before we start looking for pitchforks, torches, and the address to the nearest State House and every federal tax increase takes up tolerance space the states (and municipalities, which have their own fiscal problems) can not use. When states can’t adjust their tax rates, they don’t have many other options. They can sell bonds or they can beg Washington for more and more money they should rightly have collected themselves. We’ve seen both happen quite a lot in recent years and we’re likely to see much more before we straighten things out.
That, of course, assumes we send people to Washington who will straighten things out. That, also, is an open question. But it’s a question we can answer ourselves. In November, we will all decide whether we want people who will make government smaller or whether we’ll continue to walk blissfully toward the fiscal comeuppance that isn’t all that far away. The debt continues to rise. Medicare is a decade away from collapse. Social Security isn’t that far behind. When they fall, they’ll take the rest of all the nifty “safety net” programs with them — food stamps, S-CHIP, housing assistance, you name it. The math doesn’t lie, though many politicians in Washington do.
Let’s just fix the problems now — in DC and our states – so they don’t become unsolvable later.