THE SHAKY CASE FOR STATE BAILOUTS.

• Author: De Rugy, Veronique
• Position: ECONOMY

IN WASHINGTON, D.C., it is common to hear that anyone who opposes the federal rescue of states experiencing budget issues due to COVID-19 must be out of his or her mind. Newspapers are running story after story about how, in the absence of such bailouts, state and local legislators are forced to slash funding for services. But if you decide to shed tears for these poor states and cities, let them be crocodile tears--as those are all this tale of woe deserves.

Consider a recent New York Times article, "With Washington Deadlocked on Aid, States Face Dire Fiscal Crisis." The report tells us: "Alaska chopped resources for public broadcasting. New York City gutted a nascent composting program that could have kept tons of food waste out of landfills....In Maryland, the Baltimore Symphony Orchestra will lose a $1.6 million state subsidy."

These examples not only are not dire; they represent activities that the government has no business wasting taxpayer money on. Orchestras, for instance, overwhelmingly benefit the rich. If affluent Americans want to enjoy the pleasure of live classical music, they should pay for it themselves, fully and honestly.

In addition to the funds they receive from the federal government during regular times (up to 30 percent of states' budgets), state and local governments have already received huge sums of money from Uncle Sam during this recession. Under measures such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, they've hauled in $280 billion for various pandemic-related expenses and another $150 billion for more flexible "needs." The Federal Reserve also set up a $500 billion program to facilitate short-term borrowing by state and local governments.

Washington is nonetheless being urged to fork over more cash because revenue streams for state and local governments have dried up. There is no doubt that tax revenue has taken a hit during this recession; most everyone's revenue has. But as the Cato Institute's Chris Edwards noted in a September blog post, conflating state and local government tax revenue paints a misleading picture of the situation.

"While state income and sales tax revenues have dipped, local governments raise 72 percent of their tax dollars from property taxes, which are rising," Edwards writes. "Property tax revenues were up one percent in the second quarter of 2020 from the first quarter....Local tax revenues nationwide may not fall at all, as they did not fall in the last...