Blue States’ Fiscal Woes Test Obama [View all]

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http://www.bloomberg.com/news/2013-01-09/why-state-budgets-could-reshape-u-s-politics.html



The electoral map, the demographics behind President Barack Obama’s re-election and the high-end tax increases that were just wrung from the Republicans give Democrats reason to believe that long-term political trends are on their side in budget negotiations. This view, however, ignores what is happening at the state level.

The fiscal outlook for many states is unsustainable. This eventually may influence the politics of the national budget, both directly (through battles over federal measures to help troubled states) and indirectly (through voters’ attitudes toward government).

It may take a decade or more for this dynamic to take hold, but as leaders of both parties bargain over the debt ceiling and assess their strategies for deficit talks during Obama’s second term, they should also think about the path of state finances. The prospects should unnerve Democrats, in particular: The 26 states that Obama carried in November tended overwhelmingly to have lower credit ratings than the 24 where he lost.

The most obvious examples are California and Illinois, two big states that are deep-blue politically and deep in the red fiscally. The pattern holds much more broadly, however, across the states that broke for Obama rather than the Republican nominee, former Massachusetts Governor Mitt Romney. To see this, imagine an electoral college in which each state’s worth, rather than being dependent on its population, was instead determined by the soundness of its Standard & Poor’s credit rating.


*** dear states: stop giving away the cookie jar to corporations.
you might find your balance sheets in better shape.