Governors in many states are beginning the calendar year with sobering rhetoric. The New York Times reports there is a consensus emerging among governors of both parties that the only way out of persistent budget deficits is to, “Slash spending. Avoid tax increases. Tear up regulations that might drive away businesses and jobs. Shrink government, even if that means tackling the thorny issues of public employment and their pensions.”
There are a few exceptions. Governor Pat Quinn of Illinois spoke vaguely about “stabilizing the budget” and then increased the state’s income tax. Minnesota Governor Mark Dayton proposes to close his state’s $6.2 billion deficit with tax increases.
Forty states anticipate budget gaps totaling $140 billion in FY 2012. New Jersey’s gap is projected to be $10.5 billion, one third of the budget. Governor Christie addressed one remark to the Republican-led Congress reminding them that another round of bailouts only papers over the problems facing state budgets, “It’s time to make some tough decisions.”
Bailouts are indeed a bad idea. As Thomas Sowell writes, they merely conceal what bankruptcy reveals.