ALG Urges Congress to Reject Obama’s $50 billion States Bailout, to Instead Adopt “New Jersey Plan”

June 14th, 2010, Fairfax, VA—Americans for Limited Government (ALG) President Bill Wilson today renewed his call for Congress to reject “another bailout of insolvent state governments like New York and California, this time with a $50 billion payout to public sector employee unions in an election year.”

“To ask for another $50 billion from taxpayers in these stressful economic times to balance state government budgets — money taxpayers don’t even have and will instead have to borrow from overseas and the Federal Reserve — is an insult to the American people who are tightening their belts as they watch in horror as government grows,” Wilson said.

In a letter to Congressional leadership over the weekend, Barack Obama attempted to persuade members concerned about the burgeoning $13 trillion national debt to include $50 billion for public education spending to troubled states, as reported by the Washington Post. The current national debt equals almost 90 percent of the Gross Domestic Product.

Wilson said the Obama Administration was “politically desperate to get this done before June 30th before the fiscal year begins for most states.” The $50 billion in funding would come atop $53.6 billion that was included for states in the 2009 “stimulus”, and Wilson said “would represent the third attempt by Congressional Democrats this year to pass a states bailout.”

Wilson said the first attempt came in HR 2847, which passed the House 217-212 on December 16th, 2009 as part of a wider $154 billion bill intended to spend paid-back Trouble Asset Relief Program monies to balance state budgets. That attempt floundered in the Senate, as the provisions were stripped out of the final bill.

The second attempt came as a proposed $23 billion bailout that would have been attached to a defense appropriations bill was taken off the table, first in the Senate by Senator Tom Harkin, who could not find the votes, and then in the House by Rep. David Obey, as reported by the Associated Press.

According to a CNN report, “States are looking at a total budget gap of $180 billion for fiscal 2011, which for most of them begins July 1.” Compared with prior years, according to, state budget shortfalls totaled $113.2 billion for FY 2009, and then rose to $142.6 billion in FY 2010.

California currently faces a $20 billion shortfall. On the east coast, New York faces a more than $8 billion deficit, and New Jersey too faces a $11 billion deficit for 2011.

According to the National Association of State Budget Officers (NASBO), state spending grew from $945.3 billion in 2000 to more than $1.5 trillion 2008, almost a 58.7 percent increased during the 2000’s, where revenues were generally rising because of inflated property values and what Wilson termed “a bubble economy.”

Wilson pointed out that states knew a downturn was coming as early as 2007, but spending still grew by about $100 billion in 2008. “Everybody else is tightening their budgets, and so too must state governments,” Wilson said.

A recent letter from Wilson to Congress described Obama’s plan as a “failed approach” that will “create an incentive for states to continue to follow the failed, insolvent policies of New York and California. Making matters worse, this bill will disincentivize the prudent path that New Jersey has taken under Governor Chris Christie’s leadership in recent months, which because of the spending freeze undertaken, New Jersey will not have to raise taxes this year to balance the budget.”

The letter concluded, “We urge you to reject the New York and California plan to perpetual bailouts and deficit-spending, and instead, for the sake of taxpayers, to adopt the New Jersey plan of fiscal solvency by making the tough decisions to slash spending.”