No big surprise -- fiscal responsibility helps create growth.
The Associated Press has produced an interesting if flawed comparison of Indiana Gov. Mike Pence and his Red State fiscal model and Maryland Gov. Martin O’Malley and his Blue State model.
“Indiana achieved and maintained an AAA bond rating from the three major credit-rating agencies throughout the recession by cutting spending and accepting billions of dollars in federal aid,” The AP writes. “Maryland maintained the coveted AAA bond rating it has held for decades by raising taxes, cutting spending and accepting billions of dollars in federal aid.”
How reasonable and even-handed that sounds. How very fair. If we avoid the extremes of a California and its unacceptably massive deficits and a Kansas that cut way too much in taxes, well, then, either economic model can work just fine. A state can cut spending and find its way back to prosperity, or a state can “invest” its way to fiscal health, and either way will be good for our obsession with jobs – unemployment has gone down in both states.
But that even-handedness masks a big difference made obvious when the Red State and Blue State approaches are studied in the aggregate.
There are 25 states with the legislatures and governors’ offices both under the control of Republicans, which tends to produce a Red State model. There are 15 completely ruled by Democrats, which brings out the Blue State model. Guess which states are doing better? The seven states with the biggest debts are all Blue: Rhode Island, Connecticut, Massachusetts, Illinois, Hawaii, New Jersey and New Hampshire. The states with the least debt are all Red: Nebraska, Georgia, Texas, North Carolina, North Dakota and Tennessee. The nine cities with the most underfunded pensions are in Blue or Purple (a mixture of Democratic and Republican rule) states. Income is growing much faster in Red States. The comparisons can go on and on.
The good news is that fiscal responsibility is important not just to keep government at a sane level; it also promotes a healthy economy. The bad news is that more states don’t bow to the obvious and adopt a model that works better. But that’s federalism for you. States are free do whatever they want in their “laboratories of democracy,” and other states are free to follow the good examples or the bad ones, and residents are able to move to find the way that suits them best.
And guess what? Red States are mostly gaining population. And Blue States are losing. That makes a lot of Americans smarter than the federal government, which is incapable of even dreaming of giving up the Blue State model.