Balanced budget requirements are stupid

[WickedLou9]

Hey guys. I'm not dead!

So I have been listening to the news lately and keep hearing about all these states that are going to have to shut down thier governments... why? Because they wrote into law that they must balance their budget every single year.
Stupid.

Why is it stupid?
During a recessionary time like this, when tax revenue is down, gdp is declining, unemployment is high, etc... what do the states now have to do? they have to institute contractionary policy and raise taxes or cut spending or both, making the recession even worse than it already is.

yes they should balance thier budgets over the long term... you cant run deficits forever... but not being able to borrow and spend is a terrible thing. All of theses states going bankrupt is going to prolong and deepen the recession and probably affect other states in the process.

When California goes bankrupt and gets its credit rating cut, man that is going to be a shit storm.

[Photon1001]

My state shut down last year, issued in the press release or whatnot that the shutdown would last 2 weeks, no state cops, no state services, nothing, only very minimal services, operating the toll-bridges and such. Miraculously, the funding turned up to get everything running again after only 2 or 3 days, iirc

Of course, you're right though, one of the benefits of being a government is being able to operate at a loss. It shouldn't be the normal operating procedure, but to never do it would be forgoing one of the main reasons we have a government, I think...

[motivez]

I'm kind of pissed because UNC is going to be getting a huge funding cut (nearly ~$100 million potentially) right as I start attending. That's going to mean a less quality education, but so far they've been pretty smart about where they've cut.

[The Great Catpiss]

Originally Posted by WickedLou9

Hey guys. I'm not dead!

So I have been listening to the news lately and keep hearing about all these states that are going to have to shut down thier governments... why? Because they wrote into law that they must balance their budget every single year.
Stupid.

Why is it stupid?
During a recessionary time like this, when tax revenue is down, gdp is declining, unemployment is high, etc... what do the states now have to do? they have to institute contractionary policy and raise taxes or cut spending or both, making the recession even worse than it already is.

yes they should balance thier budgets over the long term... you cant run deficits forever... but not being able to borrow and spend is a terrible thing. All of theses states going bankrupt is going to prolong and deepen the recession and probably affect other states in the process.

When California goes bankrupt and gets its credit rating cut, man that is going to be a shit storm.

I was under the impression that borrowing and spending is part of balancing a budget.

California is in trouble because it takes out loan after loan to spend more and more on stuff they can't afford. Every year the voting ballot has more items that all require 30 year loans. Such loans should only be reserved for rare instances. You can't keep compiling loans ontop of loans to the point where you can't even pay off the interest.

California is acting like someone buying an additional $500k house every year taking out 30 year loans on each home while making only $100k per year. Yes, that person can take out a 30 year loan for the first house, but he can't afford to keep buying more and more homes.

[snjmom]

CA really needs to reform it's referendum process.

[motivez]

Originally Posted by snjmom

CA really needs to reform it's referendum process.

agreed