The fraudulent nature of spending cut hysteria

In the mid 1970's New York City had a financial crisis. The liberal spending binge under decades of liberal mayors had finally gotten the city to the point where collapse was imminent. The city pleaded for help from the federal government, but it was rebuffed. This led to the famous headline in one New York tabloid: "[President] Ford to New York -- Drop Dead!" In the absence of federal money to bail out the city budget, New York city had to make drastic cuts. The state helped, but the city still had to cut its work force from 310,000 to under 200,000. all kinds of city programs were reduced or eliminated. The funny thing was that even after all those cuts, life in New York City went on without much change at all. I lived and worked in New York at the time, and the only change I saw was that when I went to municipal offices during that time, there were no longer four or five "workers" standing around drinking coffee.

Today, we are hearing an ever increasing drumbeat of publicity about the looming financial crisis of the more profligate of states and municipalities. California is, of course, the biggest problem, but states like New York, Michigan, and Illinois, among others are on the list as well. We are told that if the federal government does not give more money to the states, there will be layoffs of teachers, police and firemen. Strangely, it is always police, teachers and firemen who are supposedly the first to go if there is a shortfall. In essence the threat of layoffs is raised as a way of scaring the public into sending more money to the state governments so that it can keep the entire state apparatus going.

The truth is that most of the alarmism in the states is bogus. Look at New Jersey as the best example of the truth. When Chris Christie took over as governor ten months ago, the expected buget for the state was $40 billion. Christie cut expenditures to $29 billion. That is over a 25% cut in spending -- a real cut, not just a lowering in the rate of increase. The screams from the liberal/union groups were deafening, but Christie forced through the cuts nevertheless. Right now, there have been a few places where teachers were laid off, but those are the districts where the teachers union refused to give any concessions such as a pay freeze or a contribution to their health insurance costs. The polce remain on guard. Fires are being put out. All of the calamities that were predicted are simply not there.

It will be very important for the new Republican controlled House of representatives to stick to its principles next year and NOT fund any more state bailouts. Each state will need to live within its means. As a nation, we can no longer afford to borrow money so that the public employees will not suffer layoffs or pay/benefit reductions. The private sector workers have all gone through the cuts for the last two years. While painful, they are necessary. The same is true for state government.