The New York Times --Wrong Again

Vermont's legislative leadership and most of its liberal big spenders will line up behind this NY Times editorial. Expect to see it quoted. In fact, they could have written it. This notion of bailing out the states is a recipe for long term disaster requiring the U.S. to print ever more money with no hope of any sound financial future. We will be eternally mired in debt that will eventually swamp this nation.

There's a reason that most states require balanced budgets. The creators of those provisions in state constitutions understood the need for fiscal discipline. The NY Times and Vermont's legislative leadership obviously do not.

Don't the California referenda matter? The Times essentially trashes the voters' concerns in favor of their left-wing ideology.

What the Obama administration should make clear is that a bias for spending cuts — and against tax increases — is the wrong approach for California and other states. Both spending cuts and tax increases are harmful in a downturn, because they reduce already weak consumer demand. But most states are required by law to balance their budgets, so when deficits emerge, they are forced to do one or the other, or both.

Contrary to conventional wisdom, raising taxes may be better than spending cuts because tax increases, especially if they are focused on wealthy taxpayers, have less of a negative impact on consumption. Spending cuts hit consumption hard, depriving the economy of money that would otherwise be spent quickly. They also have the disadvantage — so evident in the cuts proposed by Mr. Schwarzenegger — of falling heavily on the needy.