'IOU a balanced budget!'

'IOU a balanced budget!'

January 30th, 2011 in Opinion Free Press

One of the great things about federalism is that it lets states try different approaches to taxes, spending and other policies. A policy that works well in one state can sometimes be duplicated with similar success in another state, and the harm done by a bad policy can be a warning to other states to "steer clear."

Well, with a more than $25 billion budget deficit in the state of California, it should be obvious that the "Golden State's" economic policies should be avoided elsewhere.

How bad are things getting in California? Well, back in 2009, the state started issuing billions of dollars worth of "IOUs" to pay its debts. That threatened to force companies that had done business with the state into default, because banks would not accept the California-issued IOUs from those businesses in lieu of payment.

In response to its financial disaster -- brought about in part by sky-high taxes -- California actually increased taxes.

That evidently didn't work. Now, California is again threatening to issue IOUs to vendors, promising further harm to the state's economy.

California -- like our federal government -- is a case study in the consequences of extremely high taxes, undue regulation and breakneck spending. The states and Washington alike should recognize that those policies are destructive and very much to be avoided.

The only IOU that states or Congress ought to be sending to taxpayers is one that reads, "IOU a balanced budget!"