Slouching towards Insolvency – and Servitude

During America’s recent economic boom, state governments were on a huge spending spree. Believing they knew better than local municipal leaders and anxious to buy the loyalty of special interest groups, many state leaders lavishly funded every hare-brained program – particularly in the field of education and healthcare. While initiatives of this kind may sometimes reflect Catholic social principles, staying solvent should be part of the authentic virtue of solidarity, because bankruptcy has both a financial and moral cost.

Since 2003, total spending of the 50 states increased annually by 6.4 percent (more than twice the inflation rate), their total outstanding debt, about $2.19 trillion, increased a whopping 38 percent and their collective operating deficit is expected to hit $140 billion.

In the aftermath of the Wall Street meltdown, with their tax revenues declining and rainy day funds depleted – instead of warning that fiscal restraint is required because the days of wine and roses are over – many weak, cowardly state leaders are demanding that they be rewarded for failure and receive federal bailout money in order to continue funding their fiscal follies.

It wasn’t always like this. In fact state constitutions were specifically designed to maintain fiscal integrity by giving local municipalities and their citizen-taxpayers the maximum authority to make fiscal and policy decisions. The authors of state constitutions instinctively practiced subsidiary (long championed in Catholic social thought) which, to quote Michael Novak, “maintains human life proceeds most intelligently and creatively when decisions are made at the local level closest to concrete reality.”

This approach to governing led to the creation of over 80,000 municipalities nationally – counties, cities, towns, villages, hamlets – that successfully provided essential public safety services and the building and maintenance of schools and libraries, fire, water, and electrical facilities, roads and bridges. Since the New Deal days, however, federal and state magistrates have been destroying local governing by imposing unfunded mandates, regional consolidations, and financial aid with ideological strings attached. And my home state of New York has been the model for these big-government types.

In the post-World War II era, New York, with over 2,600 municipal subdivisions, was truly the Empire State, indeed the leading industrial state in the nation, with a population of 16.7 million and the largest block of electoral votes at forty-five. Its major cities – New York, Buffalo, Rochester, Syracuse, Utica, Binghamton, and Schenectady – were thriving. Sixty years later, New York’s state government is dysfunctional, its financial coffers empty, its industrial base destroyed, and its fleeing upstate population (1.5 million have moved out since 2000) is turning many cities into municipal deserts. Down to twenty-nine electoral votes, New York’s national influence is ever smaller.

Buffalo, for example, once the largest flour-mill city in the western world and America’s fourth largest manufacturing city, is now on the edge of bankruptcy. It has lost 48 percent of its population since 1960, lost its heavy industry and manufacturing base, and has 35,000 abandoned single-family homes. In 2006, Buffalo’s mayor even called for the dissolution of his city.

Why the decline? Big-spending New York governors from Nelson Rockefeller to David Paterson circumvented taxpayer oversight and neutered local governments by employing fiscal gimmicks that concealed deficit spending, created hundreds of government agencies that have independent spending power, increased layers of bureaucratic oversight, and imposed unfunded state mandates.

Rockefeller, whose 15-year reign stretched from 1959 to 1973, earned the distinction of having imposed more tax increases – fully 18 – than any governor in state history. Rocky created a massive state bureaucracy including 230 government agencies and issued $12 billion in debt.

During the governorships of Mario Cuomo (1983-1994) and George Pataki (1995-2006) total state funds spending grew from $20.9 billion to $80 billion – twice the inflation rate. Debt during the period jumped from $20 billion to $51 billion.

The most destructive fiscal gimmick employed by the state government to impose their will on local municipalities – unfunded mandates. The CEO of the Rochester Business Alliance recently declared, “Upstate [New York] is absolutely sinking under these mandates.”

The mega-unfunded mandate is the very liberal Medicaid program. Hatched by Rockefeller and expanded by his successors, today the program costs more than the combined Medicaid expenditures of America’s two largest states – California and Texas.

The average New York county devotes more than 60 percent of its taxes to cover its state-imposed share of Medicaid costs. An Erie County official told The New York Times that “Every penny we take in county property taxes is used to pay for Medicaid. This is before we pay for any libraries or plow any roads or pay any police services.”

After years of uncontrolled spending, New York has the highest local taxes, the highest combined state and local taxes in the country, and a projected three-year deficit totaling $46 billion. As a result, jobs have disappeared at an alarming rate and manufacturers have moved to the south, Europe, and India. Buffalo, Syracuse, Rochester, and Schenectady – one-time centers of commerce, industry, and technology – are facing financial and economic doom.

The big-government crowd that dominates Albany and many other state capitals are intent on destroying local governments, no matter what the financial cost, because they reject the fundamental democratic premise that people should be relied on primarily to govern themselves. Andrew Greeley has postulated that these elites despise local governments because they “are not modern and what is not modern is conservative, reactionary, unprogressive, unenlightened, superstitious, and just plain wrong.”

Expect the Community Organizers taking over Washington in January to agree to bail out the states so they can continue their mission to destroy the autonomy of America’s cities and citizens.

George J. Marlin, Chairman of the Board of Aid to the Church in Need USA, is the author of The American Catholic Voter and Sons of St. Patrick, written with Brad Miner. His most recent book is Mario Cuomo: The Myth and the Man.