Why Save For a Rainy Day?

The current stimulus package contains billions of dollars in transfer payments to the States; many of which are facing large budget deficits. Here is some data about recent spending habits.

• From 2003-2007, spending grew 7x faster than the population and 2x the rate of inflation (see chart below).



• Since 1998, state and local budgets nearly doubled (to $2 Trillion)

Some states save their money and make smart spending decisions. Others use new revenue to increase spending (instead of saving for a rainy day).

For example, California has a $40 Billion deficit and has increased their spending by 40% over the past 5 years. They are requesting bailout money from Washington.

On the flip side, South Carolina recently faced nearly a $500 Million deficit for the current budget year. What did they do? The governer called the state legislature together and they reduced spending (made the tough decisions).

Does is seem fair to you that taxpayers in some states pay their fair share, while those in other states spend more than they pay and then ask for bailouts from the federal government (you and me?)

Source article in the Wall Street Journal