The staff of the Republican Joint Economic Committee of Congress digs into the fiscal and economic performance of states in a new report that raises concerns about the diverging paths of states, with some states enacting significant reforms to deal with their debt and pension problems and others continuing to pile up liabilities. Provocatively titled Eurozone USA?, the report compares the economic performance of states with low debt, smaller levels of unfunded retirement liabilities and modest taxes to states that have higher debt and taxes.
The report ends with an assertion that states which refuse to reform their fiscal practices create a moral hazard for the federal government: if they collapse fiscally, the consequences may be so grave that Washington will be pressured to bail them out.
Today, amidst a culture of bailouts and the Administration's calls for "shared sacrifice" (which would, ironically, include massive tax hikes on a small subset of individuals and businesses), the imprudent actions and policies of some states are threatening the freedom of others.What to do about it? The report concludes by promising a further study which will detail ways that Washington can help ensure that no state insolvency threatens other states or the federal government's ability to do business.