Why don't state governments just push to repeal balanced-budget requirements?

Wouldn't there be a strong case for doing that, since insisting on the right-wing obsession with balancing the budgets is giving the banks and the business community the power to essentially overturn the will of the voters?

Really, how freaking sacred ARE balanced state budgets, anyway? Especially in times of crisis?

If it required constitutional amendments to do that, I strongly suspect a lot of working-class and dispossessed voters would gladly turn out to remove the budget handcuffs from state governments.

Wouldn't it be worth trying, at least on a temporary basis? Especially since the requirement to balance the state budget no matter what is leaving most states with a massive social deficit and, really, a massive moral deficit?

I think you have a good idea, but I don't think you can rationally talk people into it, you have to use propaganda and persuasion (or you have to remove them from a propagandized environment and give them a decade to heal).

undoing that amendment. It makes the mouth breathers think they are better than D.C.

Currently, the federal reserve controls the supply of money in the economy through treasury sales. The US federal government's fiscal policy (deficit spending) is an additional source of monetary growth.

If the states could run budget deficits, they could unilaterally increase the US money supply by billions. The result could be highly inflationary fiscal policies which would have to be offset by increasing savings through higher interest rates. Imagine if California decided to run a deficit of a few hundred billion dollars? NY too. etc...

This is basically the situation that the Euro is facing now. Several countries have been running deficits (Greece, Spain), thereby increasing the supply of money in the European Economy. These increases spur inflation and have forced interest rate increase to combat inflationary pressures.

State level deficit spending would effectively create 50 new currency-making printing presses.


here is a link to an NPR story explaining this somewhat

http://minnesota.publicradio.org/display/web/2008/12/03/why_cant_minnesota_run_a_deficit/

n/t.

I agree austerity is awful, but inflation run amok in hardly a better social solution. People living on savings or fixed incomes get destroyed by uncontrolled inflation. It also negatively impacts investment choices etc..


http://en.wikipedia.org/wiki/Hyperinflation

What we SHOULD have done was create an national emergency fund at the federal level to subsidize state budgets so that the US government would hold all the deficit responsibility. This was recommended by Krugman among others in 2008-9.

Think of it, 50 states run deficits from 1 to 20 billion (an average of 5) that's a 250 billion dollar bailout of states, far less than the one for Wall Street. But again, some states (low service states) weren't running deficits and complained that this was a bailout of unsustainable government...

of the Alaska Permanent Fund...which also pays out yearly dividends to all residents of the state.

Until that happens, though...there needs to be some emergency method of keeping economic crisis from turning into an excuse for an all-out assault on the social wage and on the non-millionaire majority.

and we're paying for it.