There are plenty of reasons for skepticism about President Obama’s latest round of stimulus ideas. Unveiled at a Brookings Institution speech today, they include some tax-credit gimmicks likely to do as much harm as good. I’ll let others make that point — or, more properly, expand on the point already made effectively by the NR editors today — and focus my attention on the other major component of the new plan, increasing federal aid for state and local infrastructure projects. Admittedly, this is a bit better than past decisions to increase federal aid for Medicaid or school operations, but it’s still unwise. It’s little more than another federal bailout.

Sending tens of billions of additional borrowed dollars down the pipeline to statehouses and city halls is the kind of policy that liberal (and even not-so-liberal) politicians at every level love. Public employees and contractors are their natural constituencies. Besides, using federal debt to fund positions and projects rather than state or local taxes and budget cuts is a nifty way to evade their constitutional balanced-budget requirements and keep local taxpayers from realizing how much their future tax bills will be growing.

The truth is that states and localities, no less than private firms and in many cases more so, made poor investments during the boom years. Recessions have complex causes but a simple definition. A recession occurs when there is a widespread mismatch between what consumers are willing to buy and what producers are offering for sale. The goods in question could be electronics, homes, cars, capital goods, or labor. The only real way to exit a recession is to eliminate this mismatch – to go through the painful but necessary process of liquidating bad investments and adjusting one’s finances and efforts accordingly.

The same logic applies to government. States and localities have produced more government than taxpayers are willing or able to finance on the books. The solution is to eliminate low-priority programs and focus scarce tax dollars on core functions. If because of past overspending states and localities can’t afford to issue more debt to fund current infrastructure necessitites, particularly at the current low interest rates, then they need to do what it takes to reduce expenses elsewhere and free up the revenue to cover those needs.

The solution is not for Washington to take the expense off the books of states and localities. All state taxpayers are also federal taxpayers. You’re just increasing their debtload in a sneaky way.