One of the many reasons I don't think Tom Woods's "nullification" strategy will be effective is that quite a few -- perhaps at some point soon all -- of the 50 states will require federal bailouts. Forty-six currently have budget short falls. Even the state with the strongest tradition of independence (Sam Houston: "Texas can survive without the Union, but the Union can't survive without Texas"), secession (Texas joined Dixie), and fiscal responsibility is now in the hole as bad as is California.
It’s come to this: The Texas budget outlook has become so bleak that we’re comparing rather favorably to the one state where balanced budgeting goes to die.
People, our budget deficit is now as bad as California’s.
Yes, the over-spending, over-regulated capital of hippiedom now has a state fiscal outlook on par with the Lone Star State.
That fact may not sit well with some people—especially in the governor’s office, which loves to bash California and never misses an opportunity to point out how Texas’ low-tax, business-friendly model has led to a more robust economy and sound state finances. When California faced a $60 billion deficit last year—a shortfall that was bigger than the entire budget of most states—you could almost hear the chortling from the Texas governor’s office. It seemed a handy example of what happens when you put big-spending liberals in charge.
It wasn’t that simple, though. The causes of California’s problems—and Texas’ lack thereof—were varied and complex. And now the states’ budget deficits are looking very similar.
Texas: $18 billion shortfall (estimated) or about 20 percent of state spending.
California: $19.1 billion shortfall (official estimate) or about 20 percent of state spending.
The numbers match up pretty neatly.
A couple of caveats: Texas—as you probably know—budgets in two-year cycles. If the budget gap does turn out to be $18 billion (and we won’t have an official number until early next year), that would represent about 20 percent of the $87 billion in state funds that Texas allocated for 2010-2011.
California budgets one year at time. But the state spends about double what Texas does. So a $19.1 billion budget gap represents about 20 percent of the roughly $83 billion California will spend this year from its general fund.
Politicians like Rick Perry might find it cute to talk about the 10th Amendment and secession in order to rile up the base, but does anyone think that such a person would give up the ability to benefit from the Fed's printing press once his state's accounts become entirely unmanageable? And if Bernanke and Obama bailed out AIG, Goldman Sachs, and (indirectly) Greece, do you really think they could justify telling any bankrupt state to drop dead? The reality is, before the whole system breaks down, the debt crisis will bring the union closer.