ALG Urges President-elect Obama to Resist State Bailouts

December 1st, 2008, Fairfax, VA—Americans for Limited Government president Bill Wilson today called upon President-elect Barack Obama to resist state calls for federal bailouts unless several key reforms are implemented both at the federal and state levels.

In a letter to the President-elect, Wilson called upon Obama to consider “reasonable, prudent measures to rein in the irresponsible budgeting that threatens to leave the next generation of Americans shackled to a mountain of debt.”

Specifically, Wilson urged that before any federal bailout for state and local governments is considered, budgets must be reassessed in light of falling home values. In addition, Wilson urged all contracts with organized labor be abrogated and set to “reasonable pay rates that are less than or equal to the private sector for the same work.” He further urged that all liabilities to employee pension funds be disclosed, budgets be trimmed back to no more than the rate of inflation over the past ten years, and all unfunded mandates imposed on the states by the federal government over the past ten years be repealed by Congress.

“The states have been hit with a double whammy,” wrote Wilson in his letter, “their own reckless spending—based in part on caving in to the demands of greedy public sector unions that clearly disdain the taxpayers, as well as sound fiscal policy—and the mandates imposed by a reckless Congress.”

Wilson said that the federal bailouts this year, totaling some $7.7 trillion according to Bloomberg News, have become uncontrolled, and that bailouts for state and local governments ought not to be added to the mix.

“The American taxpayer is going to be reeling for decades to come by the decisions being made by government today,” said Wilson in a statement. “To create a new federal entitlement to balance state budgets that grew well beyond any reasonable rate with federal tax dollars will eliminate any semblance of federalism in our Union.”

According to Wilson, the current requests for federal aid by state governors are an “end-run around constitutional, state requirements to balance budgets” and that it would be the start of “yet another federal welfare program.”

In his letter, Wilson advocated that state and local budgets be reassessed to take into account falling home values. “[C]learly the decline in home values has also fueled the decline in [property tax] revenue. The solution, however, is not to attempt to put a floor under home values or to encourage their values be overstated by assessors.”

Wilson alleges that state and local governments may attempt to overstate current property values in order to keep the tax revenues flowing. “If property is overvalued, legislators need not raise the rate of taxation on property and face the wrath of the public at the polls. Instead, property values must be allowed to find their market bottoms. No homeowner ought to be forced to pay extraneous taxation just to keep overinflated state and local budgets afloat,” said Wilson in his statement.

“President-elect Obama would do well to take note of the demands that current state budgets entail and that governors are requesting be funded by federal tax dollars,” he added. “It may be more than he bargained for.”

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