David Broder on Discipline in the States

I agree with David Broder that the states are showing more fiscal discipline than Washington. I even agree that it's crazy to extend the Bush tax cuts, for anyone, at any income level, in the face of this deficit.

But I do have a couple of quibbles with his column.

For one thing, he notes that all of the states, with the exception of Vermont, have constitutional requirements to balance their budgets. That's true, but it's not as important as you might think. These requirements only apply to the operating budget. The states are also allowed to borrow money for their capital budgets, and so they can run very substantial consolidated deficits. And they do. The way the requirements come together is that, in order to balance the operating budget, you have to keep your debt service to a manageable level. That, in turn, limits the total amount of debt a state can take on.

Second, while the states may be free to cut spending, fire state workers, and so on, the Federal government is responsible for trying to fire up the economy and get us back to full employment. So the Federal government needs to run deficits. Actually, in many cases, those balanced-budget clauses cause the states to impose unnecessary pain and suffering on their residents, cutting budget just when private spending is also lagging.

I get very tired of governors running for president with the slogan: "I balanced my budget." Well, so what? First, you were required by law to do so. Second, it's a lie.