Ryan's post had me thinking...

Federal bail outs for States. How scary a thought is that? Imagine, as I did, a State with an economy the size of California (which has a larger GDP than Mexico!) losing all ability to fund itself and depending on the US Federal Government to cut the checks that pay for the State's finances. What kind of shockwaves would that throw through the natinal economy?

The thought made me read through all I could find about what would happen in the event of a State like California going completely "broke", and the details amazed me.

First off, California is nowhere NEAR as broke as some other States. The biggest budgetary shortfall in 2010 belongs to Ryan's State: Nevada. That's right, the Silver State is facing a budgetary shortfall of more than 56% of last year's numbers, making it the most likely State in the Union to request Federal assistance to make ends meet. New Jersey, Arizona and Illinois are next, all with shortfalls higher than 32% of revenues. California, surprisingly enough, is facing of shortfall of only 9.1%... still huge, when seen in relations dollar-to-dollar with other States, but nowhere near the crisis point I had thought.

Only four States do not have shortfalls in the account books: North Dakota, Arkansas, Alaska and Montana. Not surprisingly, three of these States are in the list of ten lowest tax rates, too. That isn't a good indicator, however, because Nevada is #2 on the lowest tax rate for States... and it is damn near broke.

What I figure must happen, eventually, is that a State that can't pay for itself will be forced to end many programs and funding of support-oriented policy that will simply force local communities to pony-up. If the State lowers the tax rate accordingly, this will provide a much needed boost to the economy that will attract business and production, which will put more people to work and increase State revenues. State funding for schools, housing, emergency services, infrastructure support... all that will fall to the axe. Funding for State employee pensions will be cut, and if the unions don't like it, they'll have to close the agencies (temporarily, I'm sure) altogether. State police/troopers, DOT, corrections, school boards... all reduced in cost or eliminated completely, putting the need for funding squarely on the existing local agencies.

In short, the State will be reduced in size and scope to ONLY what can be paid for from existing revenues. This has happened before, but typically only on a temproary basis. I think that a conservative Governor could go a long way in making his State more "self sufficient" by running on the promise (and delivering) to make a balanced budget a constitutional requirement of the State (if it isn't already). Someone, somewhere, has to realize that less is better, and that keeping the money for AND the control of government within the State itself is the best way to make sure we live in vibrant and growing economies. Jindal sees this, as does Christie, Barbour, and Perdue... but none have taken the BIG step towards making the balanced budget a priority with each fiscal year (although Georgia might require a balanced budget... I'm not sure).

This is the ONLY (repeat: ONLY) functional model for how the fiscally conservative voice is going to find results in Washington DC... by making it work at a State level, and forcing the Fed to follow suit. The trend has always been, at both the Federal and State levels, to GROW government in size and cost, but before we can see a reversal in the Fed, we'll have to prove the point at the State capitol, first.