Posted by
john on Tuesday, December 09, 2008 1:06:37 PM
Last week Governors Rick Perry (Texas) and Mark Sanford (South Carolina) offered some very interesting thoughts in a WSJ piece they authored entitled "Governors Against State Bailouts". Helpfully, the governors pointed out that "every penny would have to be borrowed" to prop up ailing state governments. They caution that in the usual rush to "do something" (in this case, regarding the various fiscal crises among state governments), it would be wise to first "do no (more) harm to our country's finances."
This is a critical point: by diverting scarce resources (by borrowing) from economic best uses, and directing them to governmental entities whose governing models are clearly failures, the feds will likely accomplish little other than perpetuating fiscal doldrums, irresponsibility, and slow growth.
As an alternative, Governors Perry and Sanford suggest a model they have in fact successfully utilized - "improving soil conditions for business by cutting red tape, reforming our legal system and our worker's compensation system." Andrew Jackson called this approach "reform, retrenchment, and economy". I would call it a nod to Hauser's Law - supply-side reforms geared toward raising growth rates, and not tax rates, restores fiscal health, and beget a virtuous cycle of continuing growth.