For many state governments, these are the salad days. And as is always the case when states are swimming in cash, the politicians, interest groups and assorted others come up with new ways to either spend it on more government or cut taxes (and both if the surpluses are big enough).
Where has all of this money come from? Booming employment, rising consumer spending. Oh, and hundreds of billions of COVID-19-related bailout dollars from the federal government.
You know, the same federal government that’s more than $30 trillion in debt (or $141 trillion if you count a slew of unfunded liabilities).
That’s the big downer no one really wants to talk about in official Washington or state capitols – the ocean of debt seething in the fiscal background.
It all has to be repaid, of course. With interest. And the IOUs don’t end there. In addition, there are the trillions of dollars in unfunded liabilities that governments big and small have racked up via underfunded pension plans and rising retiree and other health care costs.
These are the kind of things that, when budgets get tight (as they inevitably will), can become genuine fiscal nightmares.
So what about those tax cuts? They are great. People get (some of) their money back from the state and are able to use it how they think best. It’s politically popular, too, and what politician doesn’t hanker to do something really popular heading into an election?
There’s also the “tax cuts help people cope with rising prices” angle to all of this. Yes, returning money to taxpayers is a form of relief. And that goes double for those living paycheck to paycheck. Again, a hugely popular policy that shows how big-hearted and concerned the pols really are about the little guy. A win-win for anyone in elected office.
But let’s allow some reality to creep back into this joyous parade.
We can have tax cuts. They will do good things for the average taxpayer. But they will do better over a much longer-term when coupled with real reductions in government spending. Tax cuts without spending cuts – or even modest spending restraint – lead to deficits and debt.
The bottom line: Behind those burgeoning state coffers is a mountain of debt and unfunded liabilities (never mind the ones Uncle Sam is totting up by the second). We ignore them at our peril.
The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.