Franklin D. Roosevelt used the crisis of the Depression to dramatically increase the size, cost, and scope of the federal government. This had the virtue of continuing high levels of unemployment and slow growth. This gave Roosevelt and his Democratic majorities in Congress the opportunity to expand government even more to fix the problem that Hoover’s tax hikes, protectionism, and massive spending programs had helped create and FDR’s carbon-copy response prolonged.
In Washington today, Obama, Reid, and Pelosi are repeating the FDR strategy of exploding the cost of government in a way that both prolongs the recession and creates (in their minds) the demand for more of the same.
At the state level, Republican governors can use the present overspending crisis to demand radical reforms rather than tax hikes to pay for overspending or minor/one-time cuts in spending that do not address systemic overspending.
Selling off assets becomes politically popular in times of crisis. We are already seeing establishment-media coverage of the scandal that government workers earn more than the taxpayers who support them. The large pensions earned with fewer years put in has finally begun to attract attention. Government transparency as first implemented by Texas’ governor Rick Perry has made it possible for millions of citizens to look at every check written by a state and every contract entered into. Kansas, Missouri, and Oklahoma have strong transparency websites, and more states are joining the fray.
But serious budget prioritizing and budget restraint only occurs when a governor or one body of the legislature takes tax hikes off the table permanently. Governor Pawlenty said tax hikes were off the table, vetoed the Democrats’ attempt to raise taxes, and won his fight to cut some $3 billion from the Minnesota budget. As a bad example, Arizona’s Republican governor Jan Brewer put tax hikes on the table and therefore got no serious spending restraint — just a $3 billion tax hike that she hopes her immigration bill will cover as a smokescreen.
Government overspending can only be solved by spending less. A crisis can be the impetus to actually cut spending or to raise taxes to make more such spending possible. Washington is opting for a VAT to pay for Obama’s spending. The 50 states offer 50 different approaches, some of which are real progress.