The Collapse of State Budgets: The Rise of Succession, Federalism & Transforming Sovereignty

Throughout the entire western world we are witnessing the implosion of government. No longer are threats primarily extrinsic in nature. Mass is no longer the dominant component in lethality, we don’t need to expect invasions of multitudes; for the arrival of digital media encapsulates power along lines of engagement outside perception. Just witness the minimum inflation with trillion dollar deficits, how is that possible? Digital money is not physical! A few clicks on a computer screen and creation ex nihilo!

How else to say it, the Victorians discovered sex, the Americans discovered credit! Government is the primary agent in credit allocation. This is the source of our calamity.

Recently Paul Vockler scrutinized the balance sheets of several state governments, his conclusions make clear that the west has arrived at a turning point. Insolvency looms.

The State Budget Crisis Task Force has identified the incriminating source: growing healthcare costs, unfounded pension liabilities, massive administrative costs that are completely unsustainable!

A good question would be to identify where state tax receipts have gone? The answer is found in a worthless currency, unsustainable taxation and inflation. Govmint has been on autopilot far too long; let’s examine the incriminating sources, for they all reside within the corrupting influences of failed liberalism, namely over-centralization shaped within a flaccid understanding of federalism.

Medicaid: currently state budgets are structured to account 25 percent of their net to this failed reimbursement program. This does not account for the annual 7 percent cost increases. As it now stands, this program is insolvent. This massive structural imbalance cannot be absorbed without significant cuts to other state programs like education or massive punitive tax increases on an already exhausted polity.

I firmly believe that better ideas regarding currency depreciation, wage growth, inflation, block grants, competitive bidding, even an nominal look at the 10th Amendment; not to mention a classical application of Federalism; all these policy tools primarily informed from the Republican premise of individual sovereignty can RESOLVE this intractable problem. As it stands now, the policy tools of an enabled liberalism will only grow to threaten the natural bonds of our Union.

Currently, states continue to expand their costs by deliberately choosing to INCREASE enrollment creating new benefits rather than reform underlying membership and cost.


Liberals think they can create a politicized wedge issue to benefit their own chances of cyclical election by punting on reform while simultaneously blowing up enrollment.

We didn’t even get to the disaster called Obamacare.

Unfunded Pensions: state pension obligations are constitutionally protected, this means that they are non-modifiable contracts, not merely political promises. Wait it gets better. The six states Vockler and his team examined have un-funded pensions over $400 billion with no plan allotted to defuse this time bomb.

The real news is not the nominal state constitutional protection afforded to these fiscal liabilities, but HOW they were contractually written. Most state pensions were structured by previous legislators and remained unreformed. This means that these contracts were written absolving the state. They’re punting to the Fed. This reader must be reminded that their exists previous federal statutory authority going back to our Founding articulating law to the effect absolving Congress from saving profligate states. Although this was surmounted with federal bailouts from our current crisis, it does not resolve an intrinsically political problem. Federal law has articulated that state governments are not permitted to declare bankruptcy because they have both taxing authority and hold assets that can be put into receivership.

Budget Gimmicks: Team Vockler found insurmountable fiscal problems originating from obscure bookkeeping. This means that legislators are deliberately running bookkeeping cons that disguise UNPLEASANT fiscal realities. This is performed by using arcane language permitting contempory legislators authority to raid other state funds or shifting current spending to future years. By permitting a fiscal category titled “on-going-budget strategy” state legislators are given a pass on confronting politically difficult realities.

In case you thought it gets better, just wait until Vockler details how numerous states are SECURITIZING FUTURE tax revenue; meaning borrowing with bonds that must be serviced by selling their projected tax collections to an investor. How’s that for skipping out on being responsible.

What’s happening is simple to understand and anticipate, namely liberalisms attempt to conjure wealth through obscure credit instruments backed by a political promise, that in the case of insolvency would permit one social group to criminalize another leading to anarchy and the need for more centralizing authority.

States are replicating the social, philosophical and fiscal dysfunction of Washington.  I will examine in future posts the underlying political philosophy that engenders this anarchy. For now, the federal fiscal calamity that is embodied in unreformed entitlements that crowd out lasting wealth creation is obscured by a leadership deficit.

Get ready for the local mayhem.


About William Holland

Systematic Theologian/International Relations
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