October 10, 2010

Re: A Billion-Dollar Cold Turkey Dinner for Rhode Island?

Carroll Andrew Morse

In response to my post from yesterday on the potential crunch coming to the Rhode Island budget based on the loss of Federal dollars, spurrued by Professor Leonard Lardaro's Staurday Projo op-ed, commenter Bill replies...

Most respectfully and to the contrary, there will always be "bailout" or other "funny" money from Washington for RI. Obama knows that those who become dependent on welfare, bailouts, and other such federal handouts will vote democrat. The "bailout" will likely be called something else, but I have no doubt it will arrive just in time to obviate the need for RI's public unions and the state legislature (of course, largely one and the same) to begin thinking seriously about reforming anything.
That certainly has been an accurate description of things have worked in Rhode Island so far, with one-time fixes like "stimulus" and tobacco money used to plug budget holes. The problem is that the trend of constant growth in cost-of-government (after the adjustment for inflation) that we have been experiencing in Rhode Island...


...cannot continue forever, under the current conditions, unless there is a never-ending supply of one-time fix money to draw on (or taxes are increased to annually cover the cost of the one-time fixes).

The flawed assumption in the we-can-always-find-another-one-time-fix strategy is that while the supply of one-time sources of revenue may be large, it is not infinite. And just like with the gambler who walks into a casino with $10,000, mistakenly believing that as long as he makes small bets, he will always have enough money available to stay in the game, it's in the nature of these matters that when the source of money used to cover a series of bad outcomes runs out, the magnitude of the damage is related not only to the last of the bad outcomes, but to the entire series of outcomes that led to the final crash.

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Without denying the general accuracy of Bill's comments, I don't think RI has enough votes to draw high bids.

Posted by: Warrington Faust at October 10, 2010 1:42 PM

I agree that logic would call for agreement with Andrew's and Warrington's thoughts, and that both are almost certainly more correct than am I.

I nevertheless remain amazed at the financial rabbits that seem to pop out of Washington's hat on a seemingly regular basis whenever the end seems upon RI. While RI may have few Congressional votes, a small number of such votes can have an outsized effect when an important vote is in play and other votes are evenly divided -- as Louisiana showed when it was able to exploit the recent health care legislation. If RI's financial house of cards really faced collapse, query whether the federal concern over riots in the streets would warrant an emergency expenditure of "maintaining public order" money, or something similar, of which part could be used to prop up the state's deficits.

Alternatively, if the supply of financial rabbits finally reached its logical end, perhaps a new war -- requiring sacrifices from all -- would be the vehicle of Washington's choice for further reducing the average standard of living significantly without undue political consequences to either political party -- if the enemy were sufficiently disliked by most (e.g., an Iran or North Korea).

Posted by: Bill at October 11, 2010 12:42 AM
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