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If You Were A Governor, Would You Take the Bailout Money?

By: Steve Johnson

2/26/2009 - 17 Comments

Several republican governors are considering their options of not taking the money from the $787 billion Federal bailout package.

If you were a governor, would you take the bailout money?  California governor, Arnold Schwarzenegger said if other states don’t want the money – he will take it.

It sounds strange to not want to take the bailout money, but I think these governors have some legitimate concerns.

For example, here are a few reasons NOT to take the bailout money;

1) States will have to hire employees to manage the programs and then fire them after the programs have run their course.  These jobs are part of the jobs created by the bailout, but they are not long term jobs and will have no economy growth impact. 

These temporary jobs could also decrease the growth of legitimate businesses that have a greater chance of creating long-term economic growth by removing talented employees from the labor pool and bidding up wages that legitimate businesses will have to compete with.

2) States will eventually have to increase their state taxes to help pay for some of the new programs put into place after the bailout money runs out.  States don’t want to start programs that they will eventually have to fund with higher taxes. 

Once the bailout money runs out, states will be hard pressed by the Federal government to continue funding the programs created with the bailout money.  Rising taxes it the last thing many states want to do, when most states should be cutting programs and cutting taxes.

3) The bailout money will initially be funded by an increase in the Federal deficit. But it will eventually have to be repaid by an increase in Federal taxes at some point in the future, which will extract more wealth from each state’s economy, causing more jobs to be lost. 

Spending the bailout money will eventually result in an increase in Federal tax, which will result in a decrease in wealth of each state.

After thinking about the long-term implication of spending the bailout money, I think the governors that are resisting the money are acting in the best interest of the nation.

After all, the bailout money is not like a bag of candy that can be quickly reproduced. Spending this money is like going to the bank and taking all the money of your children’s savings account and then taking a loan out against their future earnings and spending it on a new BMW.  How fair is that?  (although I would look good is a new BMW)

The socialism ideas that have crept into our culture and have become acceptable to our way of thinking are anything but fair to anyone. This bailout package looks a lot like money fraud by the congress.  

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