Critics: Sequester Reveals States’ Heavy Reliance On Feds

For states that rely heavily on federal government spending — states such as Virginia — the seemingly imminent budget cuts known as “sequestration” are a wake-up call.

By Kathryn Watson | Watchdog.org Virginia Bureau

Cut Spending

ALEXANDRIA, Va. — Party’s over, kids.

Mom and dad in Washington are cutting a few dollars from your allowance, at least for now.

For states that rely heavily on federal government spending — states such as Virginia — the seemingly imminent budget cuts known as “sequestration” are a wake-up call.

However you look at it, the parental federal government is running out of money. In states such as Virginia and Maryland, federal spending accounts for 19.7 percent of GDP, thanks to a heavy military presence and proximity to Washington. As a consequence, those states have the most to lose over the next decade, according to the Pew Research Center.

The umbilical cord to Washington that has fed its local economy with increased defense spending and an expanding federal government over the past decade is the same link clouding its future, said Maurice McTigue. He’s vice president for outreach and the director of the Government Accountability Project at George Mason University’s Mercatus Center in Fairfax.

“Now, that’s been part of Virginia’s success, but it’s also one of its big risks,” McTigue told Watchdog.org. “Because as the federal government changes priorities, they’re likely to have an effect on that growth that has occurred in a state like Virginia.”

The so-called ‘cuts,’ which only roll federal spending back to 2011 levels before increasing spending again annually and adding to the overall federal debt, have been grossly exaggerated, McTigue said. Considering sequestration, the federal government would need to make budget cuts nearly 20 times deeper in 2013 simply to balance this year’s budget, according to the Washington-based Cato Institute.

All the same, the spending slowdown will disproportionately affect states such as Virginia, said Mike Thompson, president of the Thomas Jefferson Institute.

Be prepared, he warns.

“Well you know, wars are temporary, and we tend to think those spending increases are permanent,” Thompson told Watchdog.org. “Well, wars do come to an end at some point. … This shouldn’t be a surprise.”

But Virginia’s reliance on Washington for defense spending only scratches the surface of the problem, McTigue said. Virginia and other states over the past decade have grown too dependent on Washington for everything from education to health care, he said.

“I think that, over time, the states have allowed the federal government to take over some of their responsibilities and that’s probably been going on for 60 or 70 years,” McTigue said. “It seemed an easy option at the time for the states.”

That growing dependence on federally funded entitlements and government programs has driven American to its budget mess, said Laura Delhomme, communications director for the Libertarian Party of Virginia. Politicians, bureaucrats and well-meaning, average citizens want to “help people,” so government programs expand, she said.

“Federal spending just incrementally grows and grows and then we get to this point where we’ve overspent what we can and we are borrowing absurd amounts of money just to pay interest and all these programs that the government shouldn’t even be involved in doing,” Delhomme said.

But local lawmakers aren’t the only ones to blame, McTigue said. The federal government likes to offer “free” funding, then rope the states into paying later, he said.

“I think that Washington is being totally paternalistic,” McTigue said.

The Medicaid expansion option under the Affordable Care Act is the perfect illustration of that shortsighted parent-child relationship, said Pete Sepp, vice president for communications and policy for the National Taxpayers Union.

Considering what just happened in Virginia, states themselves have been given outs here to prevent Medicaid from further straining their budgets, and some of them aren’t taking it,” Sepp said. “In several cases, it’s Republican governors and lawmakers who are running head-long into the trap of taking some supposedly free federal money up front and worrying about larger bills for their states down the road, later — well, I should say, not worrying about bills for their states.”

Speaking of Medicaid, the sequester barely touches entitlements, which continue to account for a growing piece of the proverbial spending pie.

In 1965, entitlements — Medicaid, Medicare and Social Security — accounted for 2 percent of the GDP. Today, they equal 10 percent of the GDP and roughly 44 percent of overall federal spending, according to the conservative Heritage Foundation.

Sepp said he hopes the sequester will force taxpayers and politicians to re-evaluate federal programs are needed at all. After all, there’s no such thing as a free lunch.

“What (the sequester) will hopefully do is prompt a re-evaluation of not only “the sky is falling” rhetoric, but the reality that this funding generally comes from one or the other pocket of the same taxpayer,” Sepp said. “It’s not as if the free money from Washington is coming from the other states. Virginians are footing the bill for part of it, too.”

 Email Kathryn at katie@watchdogvirginia.org. 

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Katie Watson
Kathryn Watson works as an investigative reporter covering government waste, fraud and abuse in the state of Virginia for the nonprofit media outlet Watchdog.org. She hails from Southern California, where she was a general assignment/local government reporter in Santa Barbara, and graduated with a bachelor's degree in journalism from Biola University. Her work has appeared in places like the Washington Times, Reason Online, and local publications of the Los Angeles Times.

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