The Great State Budget Con

California Governor Gavin Newsom speaks during a press conference in Oakland, California on May 10, 2021.


Justin Sullivan / Getty Images

Treasury Secretary Janet Yellen on Monday once again spread the fiction that states and places are drowning in red ink. Apparently, she missed the message from California Governor Gavin Newsom that the state has a staggering budget surplus of $ 75 billion.

“During the Great Recession, when cities and states faced similar revenue losses, the federal government did not provide enough aid to fill the void. That was a mistake, ”Ms. Yellen said as she put out extensive guidance on how states can use their $ 350 billion loot from the Democrats’ $ 1.9 trillion spending bill.

“Inadequate relief meant cities had to cut spending and austerity measures undermined the overall recovery,” she added. “With today’s announcement, we are planning a completely different – and much faster – path back to prosperity.”

Talk about the last war. Most states and communities were already financially successful before the Democrats gave them $ 350 billion in direct aid in March, plus $ 129 billion for schools and tens of billions more for Medicaid, colleges, and public transportation. The Census Bureau recently reported that total state and local revenues in 2020 were 3.7% higher than in 2019.

Tax revenues rose in the first few months of this year, especially in democratic states that tax their rich more heavily. New Jersey’s general fund returns for the fiscal year are 15% higher than a year ago, enabling Governor Phil Murphy to make his state’s full actuarial pension for the first time.

Illinois has two more months in its fiscal year, but its general fund income has already exceeded the grand total for each of the previous two fiscal years. Still, Governor JB Pritzker continues to claim that budget problems are an excuse to cut the state’s scholarship tax credit program, which helps low-income students attend private schools.

In terms of political shame, Mr Newsom has miraculously turned a projected $ 50 billion deficit into a $ 75 billion surplus while maintaining one of the country’s strictest Covid lockdowns and population for the first time in a century lost. He can thank the money magic of Federal Reserve Chairman Jerome Powell for creating a capital gains gold rush in Silicon Valley.

With the Sacramento Democrats unable to spend their gust of wind fast enough, Mr. Newsom plans to become a cash-turnstyle before his recall election this year, sending checks to voters. “We believe that people are better placed than us to determine how best to use these dollars,” said the governor. His “people” do not include the upper middle class and high earners, who pay almost all the taxes of the Golden State.

Taxpayers earning less than $ 75,000, including undocumented immigrants, will receive $ 1,100 ($ 600 if they have no children). These handouts account for $ 12 billion in government surplus. Mr Newsom also proposed in his revised budget to spend $ 12 billion on homelessness, $ 4.2 billion on the state’s bullet train, and $ 3.2 billion on electric vehicles. Forest fire prevention, which appears to be a much lower priority among Democrats, will only receive $ 1.2 billion.

The rising revenue confirms those who said the states don’t need a bailout. The March bill was much less about Covid than it was about giving money to democratic politicians to improve their chances of voting. Mr. Newsom proves the point.

Wonderland: By paying people not to work, the Biden Democrats will damage US work ethic for a generation. Images: Getty Images / iStockphoto

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Published in the print edition on May 15, 2021.

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