One Reason Why States Lose Power
The lessons of the Great Depression (and other smaller recessions) is that government spending is the flywheel that keeps the economy moving when downturns threaten to turn ugly. There's a catch, though: structural deficit spending is constitutionally prohibited to most states. In that context, states find it all but impossible to make the kinds of policies required to shepherd their economies through hard times. What does the average person take away from this? A perfectly understandable view that when the chips are down, the state government cuts back, but the Feds pour in resources. The state government cuts back because it is unlawful for it to do otherwise---shrinking revenues during a downturn compel it to spend less. But that's precisely the time when the Federal government is able to borrow and spend. So for many people, when they need it most, it is the Federal government that can step in. ¶ 9:36 PM
Monday, November 24, 2008
There are a few reasons why the trend over the years has been for more centralization of power with the Federal government and a diminishing of the role of the states. One main reason is that voters hold the Federal government responsible in hard times. Why? The current economic crisis provides an opportunity to see why.
The lessons of the Great Depression (and other smaller recessions) is that government spending is the flywheel that keeps the economy moving when downturns threaten to turn ugly. There's a catch, though: structural deficit spending is constitutionally prohibited to most states. In that context, states find it all but impossible to make the kinds of policies required to shepherd their economies through hard times. What does the average person take away from this? A perfectly understandable view that when the chips are down, the state government cuts back, but the Feds pour in resources. The state government cuts back because it is unlawful for it to do otherwise---shrinking revenues during a downturn compel it to spend less. But that's precisely the time when the Federal government is able to borrow and spend. So for many people, when they need it most, it is the Federal government that can step in. ¶ 9:36 PM
