The screaming from over on the Left is that states and cities need to be bailed out. The correct response is to say no and to let them stew in their own juices.
The point of a federal democracy is that a person can vote in local policies as he or she wishes, but he or she also has to pay for those policies. The locals have to pay for them, not everyone else. The locals voted for them, not everyone else.
It’s possible to dress up the request that the begging bowl get filled, of course. Currently, it’s that COVID-19 has introduced costs, and it should be all who bear the burden of them. Given that the federal government is the only entity that can actually print new money to pay for things, the way things are being paid for with quantitative easing, this seems fair enough. But if that’s so, then why is it that those costs are so much vastly higher in some places? Or, rather, why are the cries for alms so much greater?
The answer is that some places are spending vast rivers of money on things that others manage more temperately. It is said that Illinois spends 25% of its budget on public worker pensions. California’s state spending per head has risen 50% since I was last there, and it wasn’t exactly stingy then.
So, these calls for the government to cough up the cash are really an insistence that past spending policies be paid for by someone else — by us, that is, by everyone in the country other than those who voted for them. And, presumably, they would be paid for by those who didn’t gain the benefits of the policies. It’s possible that Illinois pensions work just great in Illinois, but what’s the benefit to the person in Texas now being asked to pay for them?
This brings us to one of the grand achievements of the soon-to-be past tense Trump administration. It used to be that your state taxes could be deducted from your income for your federal ones. The SALT deduction meant that high-tax localities were subsidized by all of us. This was changed, and people in high-tax jurisdictions no longer manage to get everyone else to chip in, quite so much at least, for the dubious benefits of California- or New York-style fiscal governance. Good, this is as it should be.
For this is how federalism is supposed to work when allied with democracy. We agree, collectively, that some things must be done for us all, centrally, and we all agree to pay for them. Then, we all also get to decide how more local matters are handled. We might want more or less government, more or less taxation, that can and should be handled at that more local level. This means that we can gain the government we desire, larger or smaller, with which comes the duty for us each to pay for that system we choose.
What we don’t get to do is to insist that we want the government without having to pay for it. It is righteous that big-spending state governments have to raise their funds from the taxation of those in those states. For if the people don’t like it, then they can, and should, vote to change their local system. This means no federal deductions, or at least limited ones, for local taxation paid. Further, in the current shouting match, no bailouts of states and cities that are going bust anyway.
Sure, COVID-19 needs to be paid for, but don’t allow it to be a cover for relieving the results of decades of bad government in various places. For bad government needs to have consequences, needs to be punished. Otherwise, we’re going to have more of it, aren’t we?
California, or anywhere else: Do you need more cash? Well, you have Californians to tax to get it, and as we don’t benefit from the policies the cash is spent upon, why the heck should we have to pay for them? Federalism should actually mean something, after all.
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at the Continental Telegraph.
