STEVEN MALANGA:: A Cure For Blue State Fiscal Blues – RealClearMarkets

By at November 25, 2012 | 12:43 am | Print

STEVEN MALANGA:: A Cure For Blue State Fiscal Blues – RealClearMarkets

By Steven Malanga –

Faced with massive debt, a struggling economy and political stalemate in Washington, we’ve entered the silly season for public policy. A host of citizens in states that voted against Barack Obama are petitioning to secede from the union. On the heels of that movement, the Washington Post’s political columnist Dana Milbank suggests that the President should let them leave. Most of the states where people are intent on secession, Milbank argues, are ‘takers’ from the budget, that is, they get back more in spending from the federal government than they provide in taxes and so are to a greater extent responsible for the nation’s budget woes.

No one is leaving the union, of course. But if Milbank is really interested, there is a practical and entirely doable policy that Washington could embrace which would address the fiscal imbalance of the so-called Blue states, and it would make cleaning up the federal budget mess easier too by making the budget simpler and more transparent. It’s a policy that has been suggested occasionally over the years, including by the late Sen. Daniel Patrick Moynihan. That his own Democratic Party has never embraced this solution (and wouldn’t now) tells you a lot more about Washington than Milbank’s analysis does.

Sen. Moynihan, you may know, is the guy who first started counting how much money the citizens of each state send to Washington in taxes, and what those states get back. His researchers totaled things like the value of defense contracts to local firms, salaries paid to federal officials located in each state, and grants and payments to recipients of federal programs in each state. Moynihan suspected that his own state, New York, was a net contributor, and every year for about two decades he produced a report which demonstrated who the takers and givers were.

Over time he noticed that the imbalance never changed, regardless of which party was in the White House or controlled Congress. So in one of his final studies, Moynihan suggested that maybe the country needed to pursue a different approach, which he termed a ‘new federalism.’ It was time, he argued, to pare the national government’s functions back to those things it could do better than individual states, such as national defense. Then Washington could cut federal taxes significantly with the money it saved and leave that money back in the states, where each state could then decide which model of government it would follow: a low-tax, basic services model, or a high tax, high services approach.

via RealClearMarkets – A Cure For Blue State Fiscal Blues.

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