Mitch Daniels, the governor of Indiana, says the finances of the states are going to get worse, not better. By overspending even when times were good, the states have built up unsustainable public burdens that ultimately will have to be dismantled. Indiana is fiscally sound today, but Daniels still worries about its future. He concludes:
Unlike the federal government, states cannot deny reality by borrowing without limit. The Obama administration’s “stimulus” package in effect shared the use of Uncle Sam’s printing press for two years. But after that money runs out, the states will be back where they were. Even if Congress goes for a second round of stimulus funding, driven by the political panic of bankrupt Democratic governors, it would only postpone the reckoning.
The time to plan and debate is now. This is a test of our adulthood as a democracy. Washington, as long as our Chinese lenders enable it, can practice denial for a while longer. But for states the real world is about to arrive.
POSTSCRIPT: In a related story, many states are trying to save money by nibbling around the edges. This isn’t going to work.
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