The federal government has doled out well more than $1 trillion in COVID-19 aid to the states over the last two and a half years. It was money that most red states didn’t need because they kept their economies open. But blue states shut down and begged Congress to give them money to balance their budgets.
When the money arrived, most Republican governors used the funds to retire debt and cut taxes. That was the right thing to do. Since many schools and government agencies closed down during COVID, state agencies needed less money, not more.
But three states in particular got relatively huge checks from Uncle Sam. You can probably guess which three: California, New York, and Illinois.
According to the Wall Street Journal, these three states spent money on other non-COVID programs. They passed out rebate checks and spent more money on welfare programs. As a consequence, California, Illinois, and New York still have big unpaid balances in their unemployment programs that can reach as high as $15 billion. This would be the equivalent of a business that’s going bankrupt and losing money spending its meager revenues on parties with lobster and champagne.
California is the worst offender. Gov. Gavin Newsom used the federal dollars to pass out “free money” to voters—whether they pay taxes or not.
And you thought buying votes was illegal! Meanwhile, the Golden State’s highest-in-the-nation income, sales, and gas taxes (which actually went up again on July 1) remained untouched.
Congress has tried to restrict the ability of states to use their federal checks to cut taxes. Fortunately, the courts almost all declared that prohibition unconstitutional. So most red states cut income taxes or property taxes
Cutting high tax rates to make a state more competitive is a smart economic development strategy. But larding up on more government programs, as Democratic governors did, surely isn’t.
The lesson here is that it’s never a good idea for one level of government to pass out money to another level of government. This only encourages waste with no accountability to taxpayers. If New York wants to spend its way into fiscal oblivion, be my guest. But don’t do it with money from taxpayers in other states.
What’s most maddening about this “stimulus money” that Congress pipelined into state coffers is that the states that spent the money are likely to run out of funds during the coming recession. Then sure as I’m sitting here, they will come running to Washington tin cups in hand begging for more taxpayer money.
And the fools in Congress will probably give it to them.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.